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- Can you explain the . pure expectation theory, preferred habbit theory, biased expectations theory and market segmentation theory?According to adaptive expectations, what happensto the inflation rate and the unemploymentrate in the following situations?a. Initially, the economy is operating at thenatural rate of 6 percent unemployment.The anticipated rate of inflation is6 percent, and the actual rate is also6 percent.b. In the next period, there is an unexpected risein the inflation rate to 10 percent.c. In the next period, there is an unexpected risein the inflation rate to 12 percent.define adaptive expectations what is its main implication
- Explain inflation. Is zero inflation good target?Which of the following expectations will NOT increase spending? a. Employment b. Laying off c. Maturity of Investment d. Promotion1) Explain the trade off between inflation and output in macroeconomics. 2)Exlain why the government may/may not be able to just randomly implement policies to increase ouput.
- Explain why the wages in an economy are downward rigid/sticky but not upward sticky. How does this rigidity/stickiness help to explain why the government is more likely to try to stabilize the during a recession than during an expanston. As a rough expectation, your answer should be 200-500 words (there is no formal limit). economy EFocus Your (`ynress MQuntain aT7 English (Canada) porenly étv APR 7Assume that inflation falls significantly below expectations. Diagramboth the short-run and long-run effects on employment using a PhillipsCurve diagram. What changes in this model to allow the return to long-runequilibrium?People are said to have rational expectations if they Select one: a. merely guess at the inflation rate b. assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years O c. use all available information in forming their expectations about inflation O d. assume that this year's inflation rate will be the same as last year's inflation rate
- A. What assumptions did Thomas Sargent make when he claimed that inflation is always and everywhere a fiscal phenomenon?" B. Why is it appropriate in the book's short-term model for the author to use the Phillips Curve as an Aggregate Supply curve? Does it capture the working of the labor market as well as an AS curve based, say, on sticky wages? C. Provide an example of the book's short-run model being based on "microfoundations."Suppose the public believes that a newly announcedanti-inflation program will work and so lowers itsexpectations of future inflation. What will happen toaggregate output and the inflation rate in the short run?Which substitute we may use if future prices are not expected to follow thegeneral inflation rate?