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

If the sacrifice ratio is 3, reducing the inflation rate from 10 percent to 6 percent would require sacrificing what percent of annual output?

If the short-run Phillips curve were stable, which of the following would be unusual?

Suppose a central bank reduced inflation by 4 percentage points and that made output fall by 6 percentage points for three years, and it made the unemployment rate rise from 3 percent to 9 percent for three years. What is the sacrifice ratio?

Which of the following curves is (are) upward sloping?

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, what are the values of unemployment and inflation?

Which of the following would NOT be associated with a favourable supply shock?

Which of the following best describes the sacrifice ratio for Canada?

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

The vertical long-run Phillips curve is an exception to monetary neutrality implied by the classical dichotomy.

Which of the following best characterizes the theory of rational expectations?

Which of the following would cause the price level to rise and output to fall in the short run?

Scenario 2 Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant a in the short-run Phillips curve equation is 0.8. -Referring to Scenario 2, change the expected inflation to 3 percent and draw the new Phillips curves. How did they change?

Figure 16-4 -Refer to Figure 16-4. Along SRPC1, what is the expected rate of inflation?

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

What did Samuelson and Solow believe about the Phillips curve?

Figure 16-4 -Refer to Figure 16-4. At point b, how do actual and expected inflation rates and unemployment rates compare?

Scenario 2 Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant a in the short-run Phillips curve equation is 0.8. -Referring to Scenario 2, describe the process of adjustment from the old to the new inflation-unemployment point when the expected inflation has changed.

In 1980, what was the Canadian inflation rate and unemployment rate?

A decrease in expected inflation shifts which of the following curves, and in what direction?

Suppose that the money supply increases. In the long run, employment increases according to which of the following theories?