Discuss what happened with inflation in the Global financial crisis and Covid19 crisis.

Step 1: Source and download annual data from the OECD over the period 2001-2020 on Australia for both inflation and unemployment. Prepare (in Excel) and present (in Word) a table of data, labelling the inflation variable I and the unemployment variable U. (already completed-please see attached excel file).

Step 2: Prepare and present your own time series graphs of the variables I and U using Excel and briefly comment on the evolution of both variables over 2001-2020, relating changes to any significant economic events.
Discuss what happened with inflation in the Global financial crisis and Covid19 crisis.
Discuss what happened with unemployment in the Global financial crisis and Covid19 crisis

Step 3: Use the data for unemployment and inflation that you have found above to prepare a Phillips Curve. Does the data visually seem to fit what you would expect of a Phillips Curve? (You may need to research what a Phillips Curve is.)

Step 4: Using the Reserve Bank’s target for inflation, choose and justify an individual point target for inflation (a single number) I^T.
Using the Treasury’s latest estimates of the NAIRU (non-accelerating inflation rate of unemployment), choose and justify an individual point target for unemployment U^T.

Step 5: It is often assumed in developing policy that inflation both above and below target are equally bad and that unemployment both above and below the NAIRU are equally bad. Explain why, if policy makers are equally concerned about inflation and unemployment, the variable L=〖(I-I^T)〗^2 + 〖(U-U^T)〗^2 is a good choice for measuring the “loss” from being off from the twin inflation and unemployment targets.

Step 6: Prepare (in Excel) and present (in Word) a table of data, including I, U and L.

Step 7: Prepare and present your own time series graph of the variable L using Excel and briefly comment on the evolution of it over 2001-2020, relating changes to any significant economic events. Especially comment on what is the main reason for the spicixke in L during the Covid-19 crisis.

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