Questions 1-7 are from chapter 8, and 9-11 are from chapter 10:
1. Explain how to derive the Phillips curve algebraically.
2. Derive the Phillips curve from an AD-AS diagram, and show how it shifts when inflationary expectations change.
3. Explain why and how the Phillips curve shifts with changes in (a) inflation expectations, πe, (b) monopoly power, m, and (c) the catch-all term for worker bargaining power, z.
4. Explain the history of the Phillips curve from its discovery when it appeared to be a permanent tradeoff to when it began shifting in the 70s and 80s. Illustrate the story diagrammatically.
5. Explain how the Phillips curve can be written in terms of the natural rate of unemployment, and how estimates of the Phillips curve can be used to obtain estimates of the natural rate unemployment.
6. Explain how the Phillips curve can vary (a) across countries, (b) across time, (c) when inflation is very high, (d) inflation is very low.
7. There was a debate in the late 70s and early 80s about the costs of inflation. Explain what the debate was about, and who won.
8. How should we measure the standard of living? What problems does this measure have?
9. What important facts about growth in developed countries should growth models be able to explain?
10. What is the production function? What are constant returns to scale, and why do we think it applies at the macroeconomic level? Are there constant returns to individual factors of production? Explain.
11. Use the production function and the assumption of constant return to scale to show that growth depends upon K/N, and hence upon capital accumulation and technological progress.