Week 4

Question 1

noninstitutional civilian population

Question 2

labor force

Question 3

out of the labor force

Question 4

participation rate

Question 5

unemployment rate

Question 6

separations

Question 7

structural rate of unemployment

Question 8

hysteresis

Question 9

labor market rigidities

Question 10

extension agreements

Question 11

wage indexation

Answer 11

provision that automatically increases wages in line with inflation, becomes more prevalent.

Question 12

accelerationist Phillips curve

Answer 12

to indicate that a low u rate leads to an increase in the inflation rate and thus an acceleration of the b price level

Question 13

wage determination

Answer 13

W = Pe F(u, z)
W= Pe(1-au+z)

Question 14

price setting

Answer 14

W=1/1+m

Question 15

phillips equation

Answer 15

pi=pi (expected) +(m+z)-au

Question 16

what can u infer from the pc?

Answer 16

-given expected inflation an increase in m or z will lead to an increase in inflation.
-given expected inflation a decrease in unemployment leads to an increase in inflation.

Question 17

Why did the original Phillips curve vanish?

Answer 17

because wage setters changed the way they formed expectations, no longer anchored

Question 18

theta

Answer 18

• when theta equals 0 we get the original pc
  -when theta equals 1 we get accelerationist increasing pc
  -