1. Consider the following three figures, which show the Phillips curve relationship for the 1970s, 1980s, and 1990s. The output gap is on the x-axis and the change in inflation, /v:, is on the y-axis. Explain what each of these Phillips curves tells us about each of the three decades. In which period would fighting inflation be the most difficult?| Figure 9.9: Phillips Curve Relationship, 1970s 1970s 6.0 An = 0.41 Gap 4.0 26 0.0 -6.0 -4.0 -2.0 0.0 $2.0 4.0 6.0 4.0 Figure 9.10: Phillips Curve Relationship, 1980s 1980s Ant = 0.65 Gap 2.0 0.0 8.0 -6.0 -4.0 -2.0 -1.600 2.0 =2.0 3.0 4.0 -5.0 Figure 9.11: Phillips Curve Relationship, 1990s Ant = 0.26 Gap 1990s 1.5 1.0 0.5 0.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 05 3.0 1.0 -1.52. Suppose the parameters of the IS curve are E\": 0, 5: 0.5, r = 3%, and the real interest rate is initially R = 3V0 . (a) Is the economy in its long-term equilibrium?Explain. [13) Suppose the real interest rate falls to 2 percent; what happens to the short-run equilibrium, holding everything else constant? {c} What happens to the short-run equilibrium if a} falls to 3 percent, holding everything else constant? {d} What occurs if the marginal product of capital rises to 5 percent, holding everything else constant? What would cause this to happen? 3. Consider Figure 12.14 below, which shows the price of oil From January 2005-December 2010. What are the impacts of this on the macroeconomy? In particular. M12211. macroeconomic relationship does this impact? Explain - - - - . . Figure 12. 14: Percent Change 01'! Price \"In oil price 120 1 00 80 BO 40 PERCENT F' YEAR (Source: Federal Reserve Economic Data, St. Louis Federal Reserve) 4. Between the third and fourth quarters of 2006, the housing bubble burst in the United States. Using the ASHAD framework discuss the impact of this macroeconomic event