Exam 35: The Short Run Trade Off Between Inflation and Unemployment

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

If the natural rate of unemployment falls,

Samuelson and Solow believed that the Phillips curve

In the long run,an increase in the money supply growth rate

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

The Volcker disinflation

A movement to the right along a given short-run Phillips curve could be caused by

In 1980,the U.S.misery index was

Monetary policy of the early 1980s cut inflation by more than half.

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years,the sacrifice ratio every year is

Suppose that the Prime Minister and Parliament of Veridian are disappointed with the high inflation rates under the current system where the Veridian Ministry of Finance is in charge of the money supply.They make reforms to lower inflation from its current rate of 10%.Suppose further that the public is confident that with the reforms in place that inflation will fall to 2%.Also suppose that those in control of the money supply actually conduct monetary policy so that the actual inflation rate is 4%.Using long-run and short-run Phillips curves and assuming the natural rate of unemployment is 6%,show the initial long run equilibrium of Veridian and label it "A".Assuming that the government had actually set inflation at 2% and that the public believed this,label the long-run equilibrium "B".Now,suppose that inflation expectations fell to 2% and that the government unexpectedly created inflation of 4%.Show the short-run equilibrium and label it "C".If the money supply continues to grow at a rate consistent with 4% inflation,show where the economy ends up and label that point "D".

In the early 1970s,the short-run Phillips curve shifted

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.Curve 2 is the

The large increase in oil prices in the 1970s was caused primarily by a(n)

The misery index is calculated as the

Figure 35-4 -Refer to figure 35-4.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Phillips found a negative relation between

Which of the following leads to a higher level of unemployment in the long run?

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.Starting from c and 3,in the long run,a decrease in money supply growth moves the economy to