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

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.Then it is apparent that the price index equaled

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops.The good weather would

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.

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly,on average the public thought

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply,then in the short run the Federal Reserve's action

The proliferation of Internet usage serves as an example of a favorable supply shock.

If efficiency wages became more common,

Short-run outcomes in the economy can be expressed in terms of output and the price level,or in terms of unemployment and inflation.

If policymakers accommodate an adverse supply shock,then in the short run the unemployment rate

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

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

Other things the same,a country that decides to reduce inflation will

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Phillips found a negative relation between

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

In the late 1960s,economist Edmund Phelps published a paper that

The Volcker disinflation

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 government expenditures moves the economy to

The long-run response to an increase in the growth rate of the money supply is shown by shifting

In the 1970s,the Fed accommodated a(n)