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

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 increased prices of world commodities

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

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

Suppose Congress repeals an investment tax credit that decreases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

A central bank disinflates. Output is 4% less for one year, 3% less the next year, and 2% less the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage points and unemployment rises 2 percentage points for one year, the sacrifice ratio is

Suppose the price level is 110.00 at the end of 2020, 121.00 at the end of 2021, and 128.26 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Proponents of rational expectations argued that the sacrifice ratio

Over the long run the Volcker disinflation

A vertical long-run Phillips curve is consistent with

The short-run Phillips curve shows the combinations of

How are the effects of the financial crisis shown using the Phillips curve diagram?

An economy has a current inflation rate of 8%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

If the minimum wage increased, then at any given rate of inflation

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

If the government decreases government expenditures, then in the short run, prices