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

On a given short-run Phillips curve which of the following is not held constant?

If the central bank keeps the money supply growth rate constant, but people raise their inflation expectations by 1 percentage point, then the short-run Phillips curve shifts

In the long run, which of the following depends primarily on the growth rate of the money supply?

What is meant by the natural rate of unemployment?

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

According to the short-run Phillips curve, inflation

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

The economist A.W. Phillips published a famous article in 1958 in which he showed a

A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?

Natural rate of unemployment - a × (Αctual inflation - Expected inflation) =

If taxes rise, then aggregate demand shifts

An increase in expected inflation shifts

The short-run Phillips curve shows the combinations of

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

If there is a favorable supply shock which direction does the short-run Phillips curve shift? What initially happens to unemployment and inflation as a result of this shock?

The theory by which people optimally use all available information when forecasting the future is known as

In the late 1970s, proponents of rational expectations argued that

Suppose a central bank takes actions that will lead to a higher inflation rate. The public, however, is slow to adjust its expectation of inflation. Then, in the short run, unemployment

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

Which of the following is correct if there is a favorable supply shock?