Managment Engineering - Macroeconomics of finance

First partial exam

1.Macroeconomics of Finance – 25 January 2021 (Prof. A. Florio) Part I Exercise 1 a) Define, both graphically and analytically, the natural rate of unemployment. b) Show graphically and explain the likely effects on price - and/or wage -setting behavior of the following: 1. workers become more worried about losing their jobs at any given level of employment. 2. the government intervenes to protect domestic firms fro m foreign competition. c) Starting from an initial long -run equilibrium, illustrate the effects of points 1 and 2 above on both the short -run and the long -run Phillips curves. Provide a graph and the economic reasoning underlying your answers. d) Explain carefully all the assumptions that are being made in the claim that ‘disinflation is costly’. Provide a graph and the economic reasoning underlying your answer. e) On 12 December 2020 the Economist published an article where you can read: “(…) at the end o f the 2000s, when post -financial -crisis stimulus packages increased government debt prodigiously, and “quantitative easing” (…) started to hit its stride (…) many worried that the stage seemed set for prices to surge in a way which had not been seen for a generation.” As far as you know, was a price surge a problem after the Great Recession? Motivate your answer.