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Expansion and deflation in Argentina.

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The spreadsheet provides information about the economy in Argentina. Column A is

the year, Column B is real GDP in billions of 2000 pesos, and column C is the price



1 1997 277 105.6

2 1998 288 103.8

3 1999 278 101.9

4 2000 276 102.9

5 2001 264 101.8

6 2002 235 132.9

7 2003 256 146.8

8 2004 279 160.4

9 2005 305 174.5

10 2006 331 198.0

11 2007 359 226.1

12 2008 384 267.7

a) In which years did Argentina experience inflation? In which year did it experience


b) In which years did recessions occur? In which years did expansions occur?

c) In which years do you expect the unemployment rate was highest? Why?

d) Do these data show a relationship between unemployment and inflation in


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a) In which years did Argentina experience inflation? 2000, 2002- 2008 In which year did it experience
deflation? 1997-1999, 2001

b) In which years did ...

Solution Summary

Exploration of economic data from Argentina and possible relationships between unemployment and inflation.

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2. A 1991 The Wall Street Journal cover page article entitled "Foreign Rate Increases May Worsen Slump" explained how the German central bank raised domestic interest rates in order to reduce inflation below the 3% level. At the same time, the U.S. central bank reduced domestic interest rates to fight the deepening recession in the United States.
a. Explain the pressures that rising German interest rates put on the other European Union (EU) countries' currencies. Specifically, assume exchange rates within the EU were absolutely fixed. Explain the economic effects a rise in the real German interest rate put on the DM/FF exchange rate and what the French central bank (i.e., the Bank of France) would have to do to keep the exchange rate fixed.
b. Explain the economic effects the rise in German interest rates put on the DM/FF exchange rate and what the German central bank (i.e., the Bundesbank) would have to do to keep the exchange rate fixed.
d. What is the Phillips Curve? Are your results in question (1a) consistent with the Phillips Curve?
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