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Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869 Exercise 5
Political expectations, inflation, and unemployment
Consider a country with two political parties,
Democrats and Republicans. Democrats care more about unemployment than Republicans, and Republicans care more about inflation than Democrats. When Democrats a in power, they choose an inflation lute of RD. and when Republicans are in power, they choose an inflation rate
d. Do these results fit the evidence in Table 24-1 Why or why not
e. Now suppose that everybody expects the Democrats to win the election, and the Democrats indeed win. If the Democrats implement their target inflation rate, how will the unemployment rate compare to the natural rate
Consider a country with two political parties,
Democrats and Republicans. Democrats care more about unemployment than Republicans, and Republicans care more about inflation than Democrats. When Democrats a in power, they choose an inflation lute of RD. and when Republicans are in power, they choose an inflation rate
d. Do these results fit the evidence in Table 24-1 Why or why not
e. Now suppose that everybody expects the Democrats to win the election, and the Democrats indeed win. If the Democrats implement their target inflation rate, how will the unemployment rate compare to the natural rate
Explanation
Verified
Verified
(a) To solve for expected inflation we c...
Macroeconomics 5th Edition by Olivier Blanchard
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