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

If expected inflation decreases does the short-run Phillips curve shift? If so,what direction does it shift? Does the long-run Phillips curve shift? If so,what direction does it shift?

According to the long-run Phillips curve,if the Fed increases the growth rate of the money supply,what happens to the inflation rate and the unemployment rate in the long run?

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

U.S.net exports fall due to recessions in foreign countries. A.According to the aggregate demand and supply model,what happens to the price level and output in the short run? B.According to the short-run Phillips curve what happens to inflation and unemployment in the short run? C.If the Fed wanted to reverse the effects of this shock on output,what should it do?

As the aggregate demand curve shifts to the right,what happens to the price level and output? What do these changes imply happens to the inflation rate and the unemployment rate?

If expected inflation rises but actual inflation remains the same,what happens to the unemployment rate? Defend your answer.

Suppose that a central bank reduces the money supply growth rate to disinflate. What does disinflation mean? If people do not alter their inflation expectations, what happens to output and unemployment?

Suppose the price level is 115.00 at the end of 2020, 112.02 at the end of 2021, and 109.08 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

What evidence does the Volcker disinflation provide concerning the importance of inflation expectations to the costs of disinflation?

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

According to the Phillips curve,which fiscal policies can be used to reduce unemployment in the short run?

If expected inflation falls but actual inflation remains the same,what happens to the unemployment rate? Defend your answer.

If the Fed raised the money supply growth by more than expected then the unemployment rate would ----- in the short run.Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

List three things that shift the short-run Phillips curve to the right.

If consumer confidence rises and inflation expectations remain unchanged,what happens to inflation and unemployment? Defend your answer.

If asset prices fall and inflation expectations remain unchanged,what happens to inflation and unemployment? Defend your answer.