Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Suppose that reducing inflation by 2 percentage points would cost a country 5 percent of its annual output. This country's sacrifice ratio is

Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that

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

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

What would a central bank need to do to reverse the effects of a favorable supply shock on inflation? What would its reaction do to the unemployment rate in the short run?

In the nineteenth century, some countries were on a gold standard so that on average the money supply growth rate was close to zero and expected inflation was more or less constant. For these countries during this time period, we find that increases in actual inflation were generally associated with falling unemployment. These findings

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

If a central bank reduced inflation by 4 percentage points and this made output fall by 5 percent for one year and 3 percent for another year and the unemployment rate rise 2.5 percent above its natural rate for one year and 1.5 percent above its natural rate for another year, the sacrifice ratio was

If policymakers increase aggregate demand, then in the short run the price level

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

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Disinflation would eventually cause

For a given short-run Phillips curve, if expected inflation is 8% but actual inflation is 10%, is the unemployment rate above or below its natural rate?

The large increase in oil prices in the 1970s was caused primarily by a(n)

Samuelson and Solow argued that when unemployment is high, there is

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly, on average the public thought

A decrease in government expenditures serves as an example of an adverse supply shock.