Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

If a central bank decreases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

If the Fed responded to an adverse supply shock by increasing the growth rate of the money supply and maintained the higher growth rate, what would eventually happen to the short-run Phillips curve? Why?

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Other things the same, a country that decides to reduce inflation will

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

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

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%. Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%. Then

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

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?

Which of the following statements is correct?

Milton Friedman argued that the Fed's control over the money supply could be used to peg

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Suppose the economy is currently experiencing 6% inflation per year. If the Fed wants to reduce inflation to 2% and the sacrifice ratio is 5, then how much annual output must be sacrificed in the transition?

Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%, then

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on