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

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

The misery index is supposed to measure the

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Figure 35-3. 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 35-3. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the right-hand graph. The price level in the year 2018 is

France has a higher natural rate of unemployment than the United States. This suggests that

In the 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

If expected inflation increases, which of the following shifts right?

There is a

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

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

If there is a decline in business confidence and the Fed desires to return unemployment towards its natural rate, what should it do? If business confidence eventually returns to normal but the Fed does not reverse its policy, what eventually happens to the inflation rate?

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Figure 35-9. 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 35-9. The shift of the aggregate-supply curve from AS1 to AS2

If inflation expectations rise, the short-run Phillips curve shifts

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

Figure 35-3. 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 35-3. What is measured along the vertical axis of the right-hand graph?