Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 17, Problem 2CQQ
To determine
Shift in the
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What is the effect of an increase in aggregate demand on the short-run Phillips curve?
When aggregate demand increases, _______.
A.
the short-run Phillips curve shifts upward
B.
the short-run Phillips curve shifts downward
C.
a movement occurs upward along the short-run Phillips curve
D.
a movement occurs downward along the short-run Phillips curve
The accompanying graph depicts the Short-Run Phillips
O Curve (SRPC) when the public expects no inflation in the
economy.
Macmillan Learning
a. According to this SRPC, what would inflation be if
unemployment is 9%?
0
Incorrect
b. Please move the SRPC line to reflect what would happen if
the public's inflation expectations increased so that they now
expect the inflation rate to increase by 2%.
c. If the unemployment rate is still 9%, what is the new
inflation rate after this change in expectations?
%
2
%
Inflation rate (%)
7
6
5
4
3
2
1
0
-1
-2
-3
0 1
SRPC
2
3
4 5 6
Unemployment rate (%)
7
8
9
10
QUESTION 18
According to the quantity theory of money, an increase in long-run real GDP
inflation with rising real GDP. This is because the quantity theory is a
A. reduces; does not move; Keynesian
B. raises; increases; short-run
C. raises; decreases; short-run
D. reduces; increases; long-run
E. has zero influence on; decreases; money-neutral
inflation, and the Phillips curve demonstrates that
theory of price behavior.
Chapter 17 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
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Similar questions
- How do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a yeararrow_forwardIf the actual unemployment rate falls below the natural unemployment rate, how does the actual inflation rate change? The actual inflation rate ________. A. doesn't change, but the short-run Phillips curve shifts leftward B. rises up along the short-run Phillips curve C. doesn't change, but the expected inflation rate rises D. rises and the natural unemployment rate fallsarrow_forwardHow do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a year thanks sarrow_forward
- 32 There is a new central bank president who wants low inflation much more than the previous president did. According to the Augmented Phillips Curve Model, in this situation, which of the following would be the most help in keep unemployment from rising in the sort run? a.People know the central bank president's true desires and believe he will stay in office for a long time b.Peoples' wage wage contracts are long-lasting. c.People know the central bank president's true desires and believe that he will only be in office for a short time. d.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a short time. e.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for aarrow_forward29) An inflation rate targeting rule A) reduces uncertainty about monetary policy. means that the inflation rate must exceed 5 percent in order for the rule to be effective. nas been adopted the by the Fed in response to the financial crisis of 2008-2009. D) will not work if the Fed continues to sue open market operations. 30) "As the Fed Chases Inflation, Critics Shout, 'Faster!" "For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "..the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake." www.nytimes, 7/1/2004 Economists estimate that if the Fed's policy was enacted in…arrow_forwardDraw a correctly labeled graph showing a short-run Phillips curve with an expected inflation rate of 0% and the corresponding long-run Phillips curve a. b. On your graph, label the nonaccelerating inflation rate of unemployment On your graph, show what happens in the long run if the government decides to decrease the unemployment rate below the nonaccelerating inflation rate of unemployment. Explain. С.arrow_forward
- The Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment rate Thanks!arrow_forwardThe Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment ratearrow_forwardSuppose the long-run Phillips curve shifts to the right. For any given rate of money growth and inflation, how would unemployment and output change? a. Unemployment would be higher, and output would be lower. b. Unemployment would be higher, and output would be higher. c. Unemployment would be lower, and output would be lower. d. Unemployment would be lower, and output would be higher.arrow_forward
- In theory, inflation not only ______ the value of consumers' money over time, but it also increases the ____ of producers over time. a.Decreases, wages b.Increases, interest rates c.Decreases, unemployment d.Increases, real GDParrow_forwardThe Phillips curve is given by I-T =0.1-2u The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: A. 1% B. 2% C. 3% D. 4% Answer 04:29 PM 19-10-2021arrow_forwardAccording to the quantity theory of money, an increase in long-run real GDP inflation, and the Phillips curve demonstrates that inflation with rising real GDP. This is because the quantity theory is a theory of price behavior. A. reduces; increases; long-run B. raises; increases; short-run OC. has zero influence on; decreases; money-neutral D. raises; decreases; short-run E. reduces; does not move; Keynesianarrow_forward
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