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Intermediate Macroeconomics Problem Set Due 4/19/2019 Professor: Dorian Abreu 6-1. Suppose the economy today is producing output at its potential level and the inflation rate is equal to its long-run level, with π¯ = 2%. What happens if policymakers try to stimulate the economy to keep output above potential by 3% every year? How does your answer depend on the slope of the Phillips curve?

6.2 Draw a graph with a steep Phillips curve and a graph with a gently sloped Phillips curve. (a) Explain how the two economies respond differently to a boom and to a slump

(b) What are some factors that might influence the slope of the Phillips curve?

(c) Do you think the slope of the Phillips curve has changed over time in the U.S. economy? Consider the United States in the 1970s versus today

7-2. analyzing macroeconomic events with the IS curve (I): Consider the following changes in the macroeconomic. Show how to think about them using the IS curve, and explain how and why GDP is affected in the short run. (a) The Federal Reserve undertakes policy actions that have the effect of lowering the real interest rate below the marginal product of capital.

(b) Consumers become pessimistic about the state of the economy and future productivity growth.

(c) Improvements in information technology increase productivity and therefore increase the marginal product of capital....