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

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance undertakes a public relations campaign to convince people that it will soon change monetary policy to reduce inflation to 12.5%. If Flosserlanders believe their government then which, if any, curves) shift left?

An increase in the price of oil shifts the

After an oil price shock, which of the following would move unemployment back towards its natural rate?

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation), the variable a is a parameter that measures how much

Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the short­run effects of the Fed's policy.

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

The long-run Phillips curve would shift to the right if

France has a higher natural rate of unemployment than the United States. This suggests that

Which of the following played a role in depressing aggregate demand in 2001?

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.

Which of the following is correct according to the long-run Phillips curve?

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.

Figure 35-4. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis. -Refer to Figure 35-4. What is measured along the horizontal axis of the left-hand graph?

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

In the late 1960s, Milton Friedman and Edmund Phelps argued that

The natural rate of unemployment

An adverse supply shock will shift short-run aggregate supply

If a central bank increases the money supply growth rate, then in the short run