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

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to

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?

The short-run Phillips curve is based on the classical dichotomy.

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

A vertical long-run Phillips curve is consistent with

Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Economist A.W. Phillips found a negative correlation between

If the Federal Reserve increases the growth rate of the money supply, in the long run

According to Friedman and Phelps, the unemployment rate

According to the Phillips curve, unemployment and inflation are positively related in

Suppose the central bank pursues an unexpectedly tight monetary policy. In the short-run the effects of this are shown by

Contractionary monetary policy

Some countries have inflation around or in excess of 8 percent. Suppose that the sacrifice ratio is 2.5. What is the cost of reducing inflation from 8 percent to 2 percent? In your answer, define the sacrifice ratio and explain how you found the cost of inflation reduction.

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

If inflation expectations rise, the short-run Phillips curve shifts

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in taxes moves the economy to

If people correctly anticipate that inflation will fall by 1%, then

A favorable supply shock

The position of the long-run Phillips curve depends on