Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

A policy that raised the natural rate of unemployment would shift

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

In the long run, inflation

If policymakers expand aggregate demand, then in the long run

The long-run Phillips curve would shift to the left if

Which of the following both make the sacrifice ratio higher than otherwise?

According to the short-run Phillips curve, if the central bank increases the money supply, then

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Which of the following is upward-sloping?

If efficiency wages became more common,

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the short run, an unexpected decrease in money supply growth moves the economy to

Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

A change in expected inflation shifts

Other things the same, a country that decides to reduce inflation will

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

The monetary-policy framework called inflation targeting is used explicitly by

A favorable supply shock will cause inflation to