Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

Figure 35-5 -Refer to Figure 35-5. Which of the following events could explain the shift of the aggregate-supply curve from AS₁ to AS₂?

A favorable supply shock will cause

Neither monetary policy nor any government policy can change the natural rate of unemployment.

If policymakers expand aggregate demand, then in the long run

A policy that lowered the natural rate of unemployment would shift

If the central bank increases the money supply, in the short run, output

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. In the short run the housing and financial crises

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Suppose Americans become pessimistic about the future of the economy and, as a result, reduce their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Figure 35-3 ​ ​ -Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Unexpectedly high inflation reduces unemployment in the short run, but as inflation expectations adjust the unemployment rate returns to its natural rate.

All else equal, country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's. In the long run as compared to country B, country A will have

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate toward its previous level it would