DSE-2006 ..

[Pinky]

44. A negative supply shock(eg: oil price increase) shifts the phillips curve and ___________ the natural rate of unemployment. if the govt. wants to keep the economy at the original rate of unemployment, it must have _________ inflation.
(a) lowers, ever increasing
(b) raises, ever decreasing
(c) raises, ever increasing
(d) does not change, ever increasing

......the answer given in key is (d), but shouldn't the natural rate of unemployment increase..??
..the price-setting relation moves downward..wage-setting relation is same.. so natural rate increases..???

Please reply.......


60. giiven that R denotes set of real numbers, which of the following mapping is a injective function?
(a) f(x) = tanx, where x belongs to R and x>=0
(b) f(x) = |x|, where x belongs to R
(c) f(x) = 1/x, where x belongs to R and x>=0
(d) f(x) = |x|, where x belongs to R and x>=0

....(d) is ofcourse injective..but why isn't (c) also an injective function....????

[ritu]

1/x isnt a function coz x=o doesnt have an inmage..it wud have been an injective functn if it was jist x>0 ie.widout = sign

[Pinky]

ohhhhhh.. thanks.. :)

and someone pls reply to first ques. as well......

[Gayyam]

Hi Pinky,

I too have understood (b) to be the answer. The Philips curve must shift outward, and the natural rate of unemployment must increase. Any attempt to reduce it will result in higher inflation.

[kangkan]

Yes..even bernanke says that a negative supply shock increase natural rate of unemployment..i think we shud ask amit sir

[Homer Simpson]

yeah. i think it should be (b)