a) Consider a basic representation of policy preference curves and the Phillips Curve below: (i) What would
Question:
a) Consider a basic representation of policy preference curves and the Phillips Curve below:
(i) What would policymaker indifference curves look like if a particular policymaker cared only about low unemployment? Illustrate these preference curves and indicate a possible point on the Phillips Curve that this policymaker would choose.
(ii) What would policymaker indifference curves look like if a particular policymaker cared only about low inflation? Illustrate these preference curves and indicate a possible point on the Phillips Curve that this policymaker would choose.
b) Since the onset of the pandemic in March 2020, the UK economy has seen a number of lockdowns, with the most recent occurring in January 2021. Businesses are slowly able to welcome back customers and restaurants have begun to welcome back indoor diners, leading to an increase in consumer and business confidence levels across the country.
(i) Illustrate, using the multiplier model, WS-PS model and Phillips Curve model, the short-run and potential LR effects of these lockdowns on the UK economy – assume that no policy interventions were considered and that inflation expectations are stable at 1%.
Economics of Strategy
ISBN: 978-1118319185
6th edition
Authors: David Besanko, David Dranove, Mark Shanley, Scott Schaefer