What is the phillips curve


Questions:

1 .The following are components of national product and national income for a country:

Items

Billions of Dollars

Consumption of goods and services

500

Corporate Income taxes

30

Corporate retained earnings

30

Depreciation allowances

90

Exports

210

Government expenditures on goods and services

200

Government Net Income transfers to Households

70

Gross Fixed Investment

150

Imports

210

Indirect taxes net of subsidies

100

Interest on government debt

15

Interest paid by producers in the production and service sectors

20

Net income from abroad

10

Non-cash Labour income

20

Personal income taxes 

90

Rent of building and equipment

30

Total corporate profit

75

Total earned Labour income( including self employed wages, Supplementary labour income and Farmers income)

530

Total non-Corporate Profit (income from nonfarm unincorporated business)

25

Variation in the stock of inventories

10

Using the figures given in the previous table, answer the following questions. Justify your answers.

a) (i) Calculate total government expenditures?
(ii) Calculate total government revenues
(iii) Is the government running a surplus, deficit, or balanced budget?

b) (i), calculate GDP via the expenditures approach.
(ii) Calculate National Income
c) Calculate National Income via the income approach. Does this match with your answer to question (b) (ii)?
d) Explain why your answers to questions c) and b (ii) should match each other.
e) What is the usefulness for economic policy of estimating GDP using the expenditure approach?
f) (i) Calculate personal income

(ii) Calculate disposable income
(iii) Calculate personal savings

2.True false or uncertain? Justify your answer using the data and concepts of chapter 16 of the lecture notes
"A negative inflation rate is good because lower prices are good for consumers and most economists and policy makers agree that we should have a low inflation rate"

3 .Read chapter 16 of the lecture notes: "Characteristics of the Canadian Economy". Please do not copy from the notes. Make up your own answer after reading and turning off your computer or closing your textbook.

a. What is the difference between the nominal interest rate and the real interest rate?
b. What is the Phillips curve?
c. Based on the Canadian evidence, is it true that a higher inflation rate is associated with a higher growth rate of real GDP?
d. The government of the United Sates is concerned about the high unemployment rate in the US, which reached 9.8% in October 2009. Based on the previous experience in Canada, should the governments of the US cause an increase of the inflation rate in order to reduce the unemployment rate to its "natural" level of 4%?

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Microeconomics: What is the phillips curve
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