Exam 11: The Is-Mp Model: Adding Inflation and the Open Economy

The Phillips curve will shift up with ________ or ________.

What happens to the output gap,the real interest rate,and net capital flows with the occurrence of each of the following events? Assume that exchange rates are flexible. a. The Bank of Canada increases the money supply. b. Canadian net exports decrease due to a decrease in incomes in the United States. c. Consumers decide to save more and spend less. d. Expected profits from newly-built factories in Canada decrease.

What is the Phillips curve? Explain the difference in movements along the Phillips curve and shifts in the Phillips curve,and explain what can cause these movements and shifts.

How does the open-economy IS-MP model incorporate net exports with a floating exchange rate system?

Explain the differences between the shocks that the Canadian and United States economies faced during the Great Recession.

An increase in the unemployment rate that is accompanied by a decrease in the inflation rate is represented by a ________ the Phillips curve.

A Phillips curve shows the short-run relationship between

An increase in the unemployment rate that is accompanied by an increase in the inflation rate is represented by a(n)________ the Phillips curve.

An increase in the real interest rate in Canada will cause net capital outflows to ________ and cause the dollar to ________ relative to other currencies.

Figure 11.2 -Refer to Figure 11.2...Assume the economy is in equilibrium at Ȳ₁,where real GDP equals potential GDP.The economy experiences a positive demand shock,and the Bank of Canada responds by increasing real interest rates to bring real GDP and inflation back to their original levels.Other things equal,the positive demand shock is best represented by am initial movement from

The Phillips curve will shift down with ________ or ________.

Positive demand shocks have a tendency to ________ real GDP relative to potential GDP and ________ the inflation rate.

Suppose the economy is in equilibrium with an output gap equal to zero and the actual inflation rate equals the expected inflation rate.If the economy experiences a positive demand shock,real GDP will become ________ potential GDP and the economy will move to the ________ along an existing Phillips curve.

Once the Phillips curve has shifted down,the economy is ________ because ________.