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

Suppose the long-run Phillips curve shifts to the right. For any given rate of money growth and inflation, how would unemployment and output change?

How does a decrease in the expected rate of inflation shift the Phillips curves?

Which of the following would we NOT expect to happen if government policy moved the economy up along a given short-run Phillips curve?

Which of the following did Phillips discover?

If the sacrifice ratio is 3, reducing the inflation rate from 10 percent to 8 percent would require sacrificing how much annual output?

Figure 16-4 -Refer to Figure 16-4. If the economy is at point c and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which of the following points in the short run?

Figure 16-3 -Refer to Figure 16-3. Starting from c and 3, in the short run, where does an unexpected decrease in money supply growth move the economy to?

In the long run, people come to expect whatever inflation rate the Bank of Canada chooses to produce, so unemployment returns to its natural rate.

What will an adverse supply shock cause output and prices to do?

In the late 1960s and early 1970s, how did the short-run Phillips curve shift?

According to Phillips, which of the following sets of two items have a negative relation?

Suppose that the money supply increases. In the short run, this increases employment according to what theory?

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Figure 16-3 -Refer to Figure 16-3. Starting from c and 3, in the long run, where does a decrease in money supply growth move the economy to?

If policymakers expand aggregate demand, what happens to inflation and unemployment?

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in government expenditures moves the economy to where?

Figure 16-3 -Refer to Figure 16-3. Starting from c and 3, in the short run, where does an unexpected increase in money supply growth move the economy to?

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

In the long run, what are the effects of a decrease in the rate of growth of the money supply?