High unemployment rate may reflect
Avg duration of unemployment
Non-employment rate formula
Implications of fluctuation of unemployment rate
Assumption in the medium run
Nominal wage depends on
the price level increases leads to an … in the nominal wage
If all markets were perfectly competitive, markup miu = …., P = ….
The natural rate of unemployment is …
An increase in the expected price level leads, one for one, to an increase in the actual price level. This effect works through wages
aggregate supply relation is derived from
aggregate demand relation is derived from
In the medium run, output eventually returns to …The adjustment works through changes in ….
In the AS- AD model in the short run, …price is fixed and …price can move
Consider the ADAS diagram, A monetary expansion leads to…., which is proportional to…
The impact of a monetary expansion: the horizontal shift in LM curve is partially offset by….; however, in short run it is smaller than the increase in money supply
Any change in exogenous variable in AD relation shift the curve; How large is the effect depends on the slope of AS. The …the AS, the larger increase in Y and the smaller increase in P
In the short run, a monetary expansion leads to an …in output, … in the interest rate, and an … in the price level.
The Neutrality of Money means that…
In medium run, the composition of output is different than it was before deficit reduction. Income(natural level)and taxes remain unchanged, thus, … is the same as before. … is lower than before (due to the budget deficit reduction); therefore, … must be higher than before deficit reduction by the exact amount
In the aggregate demand relation, an increase in the price level causes output to decrease because of its effect on…,and, subsequently,…
In the short run, a reduction in the price of oil will cause interest rate to …
In the ISLM model, price is allowed/not allowed to change; in ADAS model, prices are now allowed/not allowed to change in the short run but…
the interest rate is determined by the intersection of…hence conditional on the natural level of output, the interest rate is determined by
To derive AD, change….; to derive As, change…
The natural level of output can be determined by looking solely at the …relation.
If the shock is to a variable in the AS curve (other than the…), it will affect the natural rate of unemployment and thus the natural level of output
what would be the effect of expansionary monetary policy if it was used after adverse AS shock?