Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

Figure 22-7 Use this graph to answer the questions below. -Refer to figure 22-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. In the short run the increased prices of world commodities

In the long run,

Which of the following would shift the long-run Phillips curve to the right?

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Suppose the central bank pursues an unexpectedly tight monetary policy. In the short-run the effects of this are shown by

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Figure 22-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate. -Refer to Figure 22-3. What is measured along the vertical axis of the left-hand graph?

Closely watched indicators such as the inflation rate and unemployment are released each month by the

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

Friedman and Phelps argued that

In the short run, policy that changes aggregate demand changes

A favorable supply shock causes output to

In the long run,

Monetary Policy in Southland In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years. -Refer to Monetary Policy in Southland. Suppose that the Southland 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

In the long run, if the Fed decreases the rate at which it increases the money supply,

Disinflation is defined as a

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. A significant increase in the world price of oil could explain

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

Monetary Policy in Southland In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years. -Refer to Monetary Policy in Southland. Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. Suppose that the public was very skeptical and in fact thought the Southland Department of Finance was going to raise inflation to 30% so it could increase its expenditures. Then