Exam 11: Aggregate Supply and the Phillips Curve

Unprecedented stimulative policies throughout the global economy have sparked debate over the inflationary implications.Defenders of the policies argue that,even if the policies raise inflationary expectations,actual inflation will remain low.Critics charge that current policies are nearly certain to result in excessive inflation.What does the aggregate supply curve have to say?

In the 1960s,the Phillips curve was ________.

When wages and prices are completely flexible ________.

What are price shocks? Why were they not included in the original formulation of the Phillips curve? Why were they added to the modern Phillips curve?

The idea behind the Phillips curve is that ________.

________ may cause a shift of the long-run aggregate supply curve.

The natural rate of output is ________.

Which of the following never assumes,either implicitly or explicitly,independence between nominal and real variables?

As wages and prices become more sticky ________.

How do you suppose most people form an expectation of future inflation? Is that method consistent with the assumption of adaptive expectations?

On the modern Phillips curve,the initial impact of government policies to stimulate the economy is shown by ________.

If Okun's law is U - = - 0.5 (Y - ),and potential output grows at 2% per year,then a recession that causes output to decrease by one percentage point will cause unemployment to increase by ________.

On the modern Phillips curve,the initial impact of an increase in the world price of steel is shown by ________.

Based on the data in this table, if the inflation rate in period zero had been 3 percent,then the accelerationist Phillips curve is ________.

When a price shock occurs,the inflation rate is affected ________.

Given the accelerationist Phillips curve Δπ = - 0.7 (U - 5)+ ρ,suppose that inflation has increased from 8 percent to 10 percent.If the unemployment rate is 4 percent,then the price shock is ________.

-Based on the graph above,if the economy is at point 2,then (assuming no price shocks and no changes in actual and potential output)the inflation rate next period will be ________ percent.

The Long-Run Phillips Curve is vertical,suggesting that ________.

Based on the data in this table, If the natural rate of unemployment is steady at 7 percent,and,in period four,there is no price shock and unemployment is 8 percent,then the inflation rate in period 4 will be ________ percent.

In the long run ________.