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

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

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

Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?

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 .

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

An adverse supply shock shifts the short-run Phillips curve to the left.

The theory by which people optimally use all available information when forecasting the future is known as

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

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

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Refer to The Economy in 2008. In the short run the increased prices of world commodities

When aggregate demand shifts left along the short-run aggregate supply curve,

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

Friedman argued that the Fed could use monetary policy to peg

A favorable supply shock will cause inflation to

If people anticipate higher inflation, but inflation remains the same then

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

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

Samuelson and Solow believed that the Phillips curve

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