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

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

In the long run, a decrease in the money supply growth rate

Between 1993 and 2001 the U.S. economy experienced

Other things the same, if the central bank decreases the rate at which it increases the money supply, then

The Volcker disinflation

Other things constant, which of the following would reduce unemployment and raise inflation?

When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the short run?

A change in expected inflation shifts

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

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?

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve. Which of the following statements is correct?

A favorable supply shock will cause the price level

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. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

The long-run Phillips curve would shift left if

If expected inflation increases, which of the following shifts right?

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

Refer to Figure 35-4. Assume the figure depicts possible outcomes for the year 2018. In 2018, the economy is at point A on the left-hand graph, which corresponds to point A on the right-hand graph. The price level in the year 2017 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. The shift of the aggregate-supply curve from AS1 to AS2

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

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect