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

If the central bank keeps the money supply growth rate constant, but people raise their inflation expectations by 1 percentage point, then the short-run Phillips curve shifts

If the Fed reduces inflation by 2 percentage points and this results in a 6 percentage-point increase in unemployment, then the sacrifice ratio is equal to 3.

In 1980, the U.S. misery index was

If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

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

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

Figure 35-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 35-1. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to

According to the long-run Phillips curve, in the long run monetary policy influences

Suppose Americans become concerned about saving for retirement and, as a result, reduce their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

In the late 1970s, proponents of rational expectations argued that

Figure 35-8 Use this graph to answer the questions below. -Refer to figure 35-8. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more contractionary monetary policy?

If a central bank wants to counter the change in the price level caused by an adverse supply shock, it could change the money supply to shift

If efficiency wages became more common,

If the central bank decreases the money supply, then output

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

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 short run, an unexpected decrease in money supply growth moves the economy to

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

A policy that raised the natural rate of unemployment would shift

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

In the long run, an increase in the money supply