Exam 15: The Short-Run Policy Tradeoff

Define the short-run Phillips curve.

The expected inflation rate is the inflation rate that people forecast and use to help set

Both the long-run and the short-run Phillips curve shift if

Moving along a short-run Phillips curve, a reduction in the unemployment rate is achieved by

If the Fed makes a credible announcement that its policy aims to reduce inflation, the

"The short-run Phillips curve is vertical at the natural unemployment rate." Is the previous statement correct or incorrect?

-The short-run Phillips curve tradeoff becomes less favorable if either

A country reports a potential GDP of $6 trillion, a natural unemployment rate of 4 percent and an expected inflation rate of 2 percent.Using Okun's Law, if the unemployment rate is 5 percent, what is real GDP?

Comparing the short-run Phillips curve and the long-run Phillips curve, we see that there is

The short-run Phillips curve shifts when

Using the Phillips curve model, how might it be possible for the Fed to lower inflation without increasing unemployment?

If the Fed wants to lower everyone's expected inflation rate, one alternative is to suddenly reduce the inflation rate; however

When the expected inflation rate ________, the short-run Phillips curve ________.

The natural rate hypothesis states that when the inflation rate

-The long-run Phillips curve is the relationship between

According to Okun's Law, for each 1 percentage point that the unemployment rate is above the natural unemployment rate, then

When the natural unemployment rate increases, the short-run Phillips curve ________ and the long-run Phillips curve ________.

The long-run Phillips curve is a ________ curve, and moving along the long-run Phillips curve an increase in the inflation rate is associated with ________ in the natural unemployment rate.

Suppose an economy experiences a permanent increase in its natural unemployment rate.This change leads to

The long-run Phillips curve applies when the economy is at full employment, so the long-run Phillips curve is ________ which demonstrates that changes in the inflation rate ________ effect on unemployment.