Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

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

The short-run relationship between inflation and unemployment is often called

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?

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Suppose that money supply growth increases. In the long run, this increases employment according to

If the unemployment rate is below the natural rate, then

If inflation is less than expected, then the unemployment rate is

Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

In the late 1960's, Milton Friedman and Edmund Phelps argued that a tradeoff between inflation and unemployment

An increase in the natural rate of unemployment shifts the short-run Phillips curve to the . If the central bank sees the increase in the unemployment rate, but thinks the natural rate has remained the same and so wants to reduce unemployment, it would the money supply growth rate. If it maintains this money supply growth rate, eventually the short run Phillips curve will shift and unemployment will be .

In the late 1970s, proponents of rational expectations argued that

An increase in expected inflation shifts the

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

According to the long-run Phillips curve, in the long run monetary policy influences

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?

Which of the following shifts aggregate supply to the right?

Friedman and Phelps believed that the natural rate of unemployment was constant.

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