Exam 22: The Short Run Trade Off Between Inflation and Unemployment: Part A

Explore all topics

Suppose,as in the 1970's in the U.S. ,that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force.Would this have any effect on the long-run Phillips curve?

Free

(Essay)

4.9/5

(92)

Question 1

Correct Answer:

Verified

Since this would raise the natural rate of unemployment, the long-run Phillips curve would shift to the right.

Government expenditures increase.What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Free

(Essay)

4.9/5

(77)

Question 2

Correct Answer:

Verified

The price level and output rise. Because the price level rises, the inflation rate is higher. Because output is higher, the unemployment rate is lower.

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve

Free

(Essay)

4.8/5

(81)

Question 3

Correct Answer:

Verified

Both reflect the classical dichotomy.The vertical long-run aggregate supply curve says that,in the long run,the economy will be at its natural rate of output,and that this is the same no matter what the price level.The natural rate of output depends on the natural rate of unemployment.The vertical Phillips curve says that,in the long run,the economy will be at the natural rate of unemployment (corresponding with the natural rate of output),and that this is the same no matter what the inflation rate.Both curves are consistent with the classical dichotomy that says real variables are not affected by nominal variables.

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

(Short Answer)

4.8/5

(66)

Question 4

For a given short-run Phillips curve,if expected inflation is 10% but actual inflation is 8%,is the unemployment rate above or below its natural rate?

(Short Answer)

5.0/5

(87)

Question 5

If the Fed responded to an adverse supply shock by increasing the growth rate of the money supply and maintained the higher growth rate, what would eventually happen to the short-run Phillips curve? Why?

(Short Answer)

4.9/5

(90)

Question 6

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

(Essay)

4.9/5

(87)

Question 7

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

(Essay)

4.8/5

(81)

Question 8

List one specific policy that would shift the long-run Phillips curve to the right.

(Short Answer)

4.7/5

(76)

Question 9

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

(Essay)

4.7/5

(83)

Question 10

Some economists argue suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work. For example, if a government cuts money growth but makes no real fiscal reforms, people will expect the government will eventually need to expand the money supply to pay for its expenditures. Thus, the promise to fight inflation will not be credible. Explain why credibility is important to a reduction in the inflation rate.

(Essay)

4.8/5

(68)

Question 11

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

(Essay)

4.9/5

(67)

Question 12

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

(Short Answer)

4.8/5

(65)

Question 13

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

(Short Answer)

4.7/5

(85)

Question 14

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

(Short Answer)

4.9/5

(81)

Question 15

What is meant by the natural rate of unemployment?

(Short Answer)

4.8/5

(68)

Question 16

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

(Essay)

4.9/5

(79)

Question 17

How are the effects of the financial crisis shown using the Phillips curve diagram?

(Short Answer)

4.9/5

(89)

Question 18

What is meant by accommodation?

(Essay)

4.9/5

(75)

Question 19

A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?

(Short Answer)

4.8/5

(82)

Question 20

Showing 1 - 20 of 62

Exam 22: The Short Run Trade Off Between Inflation and Unemployment: Part A

Suppose,as in the 1970's in the U.S. ,that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force.Would this have any effect on the long-run Phillips curve?

Government expenditures increase.What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

For a given short-run Phillips curve,if expected inflation is 10% but actual inflation is 8%,is the unemployment rate above or below its natural rate?

If the Fed responded to an adverse supply shock by increasing the growth rate of the money supply and maintained the higher growth rate, what would eventually happen to the short-run Phillips curve? Why?

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

List one specific policy that would shift the long-run Phillips curve to the right.

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

What is meant by the natural rate of unemployment?

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

How are the effects of the financial crisis shown using the Phillips curve diagram?

What is meant by accommodation?

A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A