Exam 16: The Short-Run Tradeoff between Inflation and Unemployment

If policymakers expand aggregate demand,what happens to inflation and unemployment in the long run?

How will an adverse supply shock shift the short-run Phillips curve,and how will it change unemployment?

An estimate of the short-run Phillips curve for a hypothetical economy is u = 12 - 1.5p,where u is the unemployment rate and p is the inflation rate. a. If the natural rate of unemployment is 8 percent, what is the expected inflation rate that is consistent with this short-run Phillips curve? b. Suppose the government passes legislation that decreases the natural rate of unemployment by two percentage points. What is the new long-term inflation rate?

What is the effect of an adverse supply shock?

In the late 1960s,which of the following was published by economist Edmund Phelps?

According to Friedman and Phelps,no matter what a central bank does to the money supply,which of the following will happen in the long run?

Suppose that the money supply increases.According to the Phillips curve model,what are the effects of this policy change?

Suppose that weather around the world is especially good next year,so farmers have unusually good crops.What might we expect that this will do to the short-run and long-run Phillips curves?

If macroeconomic policy expands aggregate demand,unemployment will fall and inflation will rise in the short run.

Suppose the Bank of Canada reduces inflation 2 percentage points,and this makes output fall 12 percentage points and unemployment rises 4 percentage points.What is the sacrifice ratio?

According to Phelps and Friedman,in the short run,what effect does an increase in the money supply have on prices and unemployment?

Who releases the closely watched indicators such as the inflation rate and unemployment each month?

In recent years,inflation expectations have fallen.How did this shift the short-run Phillips curve,and what are the implications for unemployment?

Explain the causes and consequences of the early 1970s recession in Canada.How did the authorities respond,and what were the long-term effects of this response? What do we learn from this case study?

Suppose a war disrupts the supply of oil to the country.What would we expect to happen to the short-run aggregate-supply curve,the short-run Phillips curve,and the long-run Phillips curve?

If the government raises government expenditures,what happens to prices and unemployment in the short run?

In the long run,how does an increase in the rate of growth of the money supply shift the Phillips curves?

Which of the following was the primary cause of the large increase in oil prices in the 1970s?

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

More flexible labour markets will shift the long-run Phillips curve and the long-run aggregate-supply curve in which direction?