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The table below shows the behavior of the annual growth rate of real GDP of the United Kingdom during four recession episodes:the eighties, the nineties, the global financial crisis (2008–2010) and the European sovereign debt crisis (2010–2015). Download the time series from the Web site of the Office of National Statistics from the sections entitled […]

Discuss the following statements. a. The Phillips curve implies that when an economy is operating below full capacity, a significant increase in aggregate demand is likely to cause a reduction in unemployment and an increase in inflation. b. Monetary policy is quite important in determining the level of employment because the key connection or link

Label each of the following statements true, false, or uncertain. Explain briefly. a. The original Phillips curve is the negative relation between unemployment and inflation that was first observed in the United Kingdom. b. The original Phillips curve relation has proven to be very stable across countries and over time. c. For some periods of

a. The Phillips curve is .Rewrite this relation as a relation between the deviation of the unemployment rate from the natural rate, inflation, and expected inflation. b. In the previous chapter, we derived the natural rate of unemployment. What condition on the price level and the expected price level was imposed in that derivation? How

The text proposes the following model of expected inflation a. Describe the process of the formation of expected inflation when . b. Describe the process of the formation of expected inflation when . c. How do you form your own expectation of inflation? More like (a), or more like (b)?

For the following changes in economic policy, explain how the growth rate and the level of output in the future would be affected. Distinguish between short-run effects and long-term effects. a. The government announces a policy aimed at balancing the government budget that amounts to a permanent reduction in public. b. The government decides a

Suppose that a private hospital is pondering its next investment—the buying of costly medical equipment for $1 million. The new equipment should bring in real net profits of $150,000 per year. The real interest rate is 8% this year and expected to be constant; the depreciation rate is 10% for this kind of machinery. a.

The European Commission (EC) measures consumer and business confidence throughout the European Union (EU) through periodic Business and Consumer Surveys. Find the non-seasonally adjusted data for consumer confidence in EU member states on the Commission’s Web site (http://ec.europa.eu/). The EC also compiles macroeconomic data accessible through the AMECO database. Find the values of final consumption

The United Kingdom’s Office for National Statistics (ONS) periodically releases series of data on various subjects. On the ONS Web site you can find the time series related to: quarter-to-quarter growth in GDP, business investment, and retail sales. For the latter, make sure you select the non-seasonally adjusted value for total retail sales (available on

The Focus box “Can a Budget Deficit Reduction Lead to an Output Expansion? Ireland in the 1980s” provides an example of fiscal consolidation. Ireland had a large budget deficit in 1981 and 1982. a. What does a deficit reduction imply for the medium run and the long run? What are the advantages of reducing the