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

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Other things the same,if there is an increase in the money supply growth rate that is larger than expected,then in the short run

Proponents of rational expectations theory argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations,the sacrifice ratio could be as small as

In the long run,if the Fed increases the rate at which it increases the money supply,

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%.Suppose that the public had expected that the Department of Finance would reduce inflation,but only to 20%.Then

If there is a temporary adverse supply shock,then the short-run Phillips curve shifts

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

Figure 35-5 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-5.Starting from C and 3,in the short run an unexpected increase in money supply growth moves the economy to

If the Fed announced a policy to reduce inflation and people found it credible,the short-run Phillips curve would shift

As aggregate demand shifts right along the aggregate supply curve,

Suppose the Fed decreased the growth rate of the money supply.Which of the following would be lower in the long run?

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.The money supply growth rate is greatest at

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 the money supply growth rate moves the economy to

A favorable supply shock will cause the price level

A decrease in expected inflation shifts

An adverse supply shock causes inflation to

Which of the following is correct if there is an adverse supply shock?

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 effects of increased prices of world commodities is shown by shifting