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

In the United States during the 1970s, expected inflation

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?

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Figure 35-9. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

The very low inflation that the U.S. experienced in 2009 and 2010

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

A favorable supply shock

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?

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

According to Friedman and Phelps, the unemployment rate

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

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.

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

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Contractionary monetary policy

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B