Questions a, b, and c must be at least one paragraph each
A.) Assume the following information is relevant for an advanced economy over a three-year period. Describe in detail the macroeconomic situation faced by this society. Is cost-push inflation evident? What corrective policies would you recommend and why?
|
Year
|
Increase in Price Index
|
Increase in Labor Productivity
|
Industrial Production
|
Average Unemployment Rate
|
Hourly Wage
|
|
1
|
167
|
4%
|
4%
|
4.5%
|
$6.00
|
|
2
|
174
|
3%
|
2%
|
5.2%
|
$6.50
|
|
3
|
181
|
2.5%
|
1.5%
|
5.8%
|
$7.10
|
B.) What contributed to stagflation's demise between 1982 and 1989? How did these events affect aggregate supply and the Phillips Curve?
C.) Compare and contrast the three budget philosophies: annually balanced budget, cyclically balanced budget, and functional finance.