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

Samuelson and Solow reasoned that when aggregate demand was high,unemployment was

Suppose the central bank pursues an unexpectedly expansionary monetary policy.In the short-run the effects of this are shown by

In 1968,economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

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

The theory by which people optimally use all available information when forecasting the future is known as

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

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in taxes moves the economy to

If a central bank increases the money supply in response to an adverse supply shock,which of the following does its action move back closer to its value before the shock?

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

A change in expected inflation shifts

In most of the 1970s,the Fed's policy created expectations of high inflation.

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government then which,if any,curve(s)shift left?

For a number of years Canada and many European countries have had higher average unemployment rates than the United States.The Phillips suggests that these countries

Figure 35-1.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,U represents the unemployment rate. -Refer to Figure 35-1.Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012,and those two points correspond to points B and C,respectively,on the left-hand graph.Also suppose we know that the price index equaled 120 in 2011.Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of rising world commodity are shown by

The long-run Phillips curve would shift left if

Unemployment would decrease and prices increase if

In the short run,policy that changes aggregate demand changes

Figure 35-3 Refer to figure 35-3.In this order,which curve is a long-run Phillips curve and which is a short-run Phillips curve? a. A,B b. A,D c. C,B d. None of the above is correct. ANS: B DIF: 1 REF: 35-2 NAT: Analytic LOC: Unemployment and inflation TOP: Short-run Phillips curve | Long-run Phillips curve MSC: Definitional -Which of the following is vertical?

A policy that raised the natural rate of unemployment would shift