Answer to Question #136747 in Macroeconomics for Vik

Question

1. a) Derive the slopes of Phillip’s curve (PC, thereafter) and the Monetary Rule (MR, henceforth) curve. What economic implication do you get from these slopes of these two curves?

b) Consider the utility loss function of the central bank; where it only cares about reducing the output gap. Now, due to the ongoing pandemic, economy is going through the recession along with the disinflation. In a graph consisting the utility loss function of CB, show how CB will accommodate the recession?

2 a) A fall in the unemployment benefit would reduce the intercept of both the labour supply and the wage-setting curve. In a graph with labour supply, WS and PS explain how this incident will affect the decision of the firms and the equilibrium unemployment? State why this happens. (Make sure to mention the axes and direction of the shifts of the curves)

Answer 1

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