Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 31, Problem 5MCQ
To determine
To find:
The change in the short-run
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Moving along the short-run Phillips curve, if ________ increases, then ________ decreases.
unemployment; the expected inflation rate
unemployment; the price level
inflation; the price level
inflation; real GDP
inflation; unemployment
According to Okun's Law, when the natural employment rate is 6 percent and potential GDP is $10 trillion, then when actual employment is 7 percent, real GDP is
$9.8 trillion.
$10.1 trillion.
$10.2 trillion.
$9.9 trillion.
$8 trillion.
The long-run Phillips curve shows the relationship between
inflation and interest rates at full employment.
aggregate demand and aggregate supply at full employment.
inflation and unemployment at full employment.
aggregate demand and interest rates at full employment.
the price level and real GDP when the economy is not at full employment.
If the expected inflation rate changes, the long-run Phillips curve ________, and the short-run Phillips curve ________.
does not shift; does not…
19) The occurrence of financial crowding out implies that:
Short-run fiscal expansion increases the size of the public sector
Long-run growth is adversely affected by public spending
Domestic banks benefit at the expense of foreign banks
The long-run Phillips curve is vertical
Which of the following statements are true?
Only Statement (1) is correct
Statements (1) and (3) are correct
(3) Statements (1) and (2) are correct
(4) Statements (2) and (4) are correct
Question 28
A decrease in expected inflation will have what effect on the Phillips Curve?
O The short-run Phillips Curve will shift up.
O The short-run Phillips Curve will shift down.
The long-run Phillips Curve will shift in.
O The long-run Phillips Curve will shift out.
Chapter 31 Solutions
Foundations of Economics (8th Edition)
Ch. 31 - Prob. 1SPPACh. 31 - Prob. 2SPPACh. 31 - Prob. 3SPPACh. 31 - Prob. 4SPPACh. 31 - Prob. 5SPPACh. 31 - Prob. 6SPPACh. 31 - Prob. 7SPPACh. 31 - Prob. 8SPPACh. 31 - Prob. 9SPPACh. 31 - Prob. 10SPPA
Ch. 31 - Prob. 11SPPACh. 31 - Prob. 1IAPACh. 31 - Prob. 2IAPACh. 31 - Prob. 3IAPACh. 31 - Prob. 4IAPACh. 31 - Prob. 5IAPACh. 31 - Prob. 6IAPACh. 31 - Prob. 7IAPACh. 31 - Prob. 8IAPACh. 31 - Prob. 9IAPACh. 31 - Prob. 10IAPACh. 31 - Prob. 1MCQCh. 31 - Prob. 2MCQCh. 31 - Prob. 3MCQCh. 31 - Prob. 4MCQCh. 31 - Prob. 5MCQCh. 31 - Prob. 6MCQ
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- K If the natural unemployment rate increases and the expected inflation rate remains constant, then A. neither the long-run Phillips curve nor the short-run Phillips curve shifts B. the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward C. the long-run Phillips curve shifts rightward and the short-run Phillips curve does not shift D. the short-run Phillips curve shifts rightward and the long-run Phillips curve does not shiftarrow_forwardA decrease in the natural unemployment rate shifts the long-run Phillips curve ________ and ________ theshort-run Phillips curve.A) rightward; does not shiftB) leftward; shifts rightwardC) rightward; shifts rightwardD) leftward; shifts leftward. Please type out the correct answer ASAP within 40 50 minutes with proper explanation of the each option given. Thank you.arrow_forwardQuestion 30 The short-run Phillips curve is based on the assumption that there is_____. no relationship between the inflation and unemployment a direct relationship between the inflation and unemployment an inverse relationship between the inflation and unemployment a trade-off between the output and unemploymentarrow_forward
- QUESTION 9 The short-run Phillips curve shifts upward when: actual unemployment decreases actual unemployment increases. actual inflation increases. expected inflation increases. ●●arrow_forwardMake sure that no plagiarised answerarrow_forward“The more people at work, the higher their bills” The Phillips Curve shows the correlation between unemployment and inflation.” In the light of this statement,(a) Draw the short-run trade-off between inflation and unemployment. How might the Central Bank move the economy from one point on this curve to another? (b) Draw the long-run trade-off between inflation and unemployment. Explain how the short-run and long-run trade-offs are related. (c) Illustrate the effects of the following developments on both the short-run and long-run Phillips curves. Give the economic reasoning underlying your answers.1. A rise in the natural rate of unemployment.2. A decline in the price of imported oil.arrow_forward
- Question 3 Suppose inflation over the next year is expected to be 5%, and assume there are no supply shocks. What rate of inflation will the short-run Phillips curve show at the natural rate of unemployment? 0% b) Between 0% and 5% c) 5% d) Over 5% Question 4 Which of the following explains why the long-run Phillips curve is drawn as a vertical line? a) Because in the long run, government policies will ensure that unemployment is at its natural rate. b) Because in the long run, the labour market will settle so that unemployment is at its natural rate. Because of the quantity theory of money. d) Because its true shape is unknown. Question 5 Which of the following might shift the short-run Phillips curve to the left? 8) A rise in the expected rate of inflation. b) A natural disaster which temporarily disrupts production. c) A rise in the benefits paid to unemployed people. d) An increase in the labour force.arrow_forwardWhich of the following is downward-sloping? a. both the long-run Phillips curve and the long-run aggregate-supply curve b. neither the long-run Phillips curve nor the long-run aggregate-supply curve c. the short-run Phillips curve, but not the long-run aggregate-supply curve d. the long-run Phillips curve, but not the long-run aggregate-supply curvearrow_forwardWhat occurs when the natural unemployment rate increases? A. The short-run Phillips curve doesn't change and the long-run Phillips curve shifts rightward. B. The long-run Phillips curve doesn't change and the short-run Phillips curve shifts upward. C. The long-run and short-run Phillips curves shift rightward and the expected inflation rate rises. D. The long-run and short-run Phillips curves shift rightward and the expected inflation rate doesn't change.arrow_forward
- What occurs when the natural unemployment rate increases? A. The short-run Phillips curve doesn't change and the long-run Phillips curve shifts rightward. B. The long-run Phillips curve doesn't change and the short-run Phillips curve shifts upward. C. The long-run and short-run Phillips curves shift rightward and the expected inflation rate rises. D. The long-run and short-run Phillips curves shift rightward and the expected inflation rate doesn't change. tha nksarrow_forwardThe diagram opposite shows two short-run Phillips curves (PC0 and PC1). PC0 corresponds to a situation in which workers expect no inflation. (a) What is the natural rate of unemployment? (b) What is the expected rate of inflation if the Phillips curve is PC1? Suppose that the economy begins in long-run equilibrium with zero inflation and that the authorities adopt a policy of constant monetary growth because they wish to reduce unemployment below its existing level. (c) Identify the short-run effect on unemployment and inflation. Unemployment........................................................................................................................…arrow_forward9 Consider the AD-AS model: (a) Explain with your own words what is the Phillips Curve. (b) Starting from the price and wage setting equations derive an expression for the Phillips Curve. (c) Explain the role of expectations in the Phillips Curve. Compare the cases of adaptive expectations and rational expectations and explain what are the implications for the monetary policy maker.Consider the AD-AS model: (a) Explain with your own words what is the Phillips Curve. (b) Starting from the price and wage setting equations derive an expression for the Phillips Curve. (c) Explain the role of expectations in the Phillips Curve. Compare the cases of adaptive expectations and rational expectations and explain what are the implications for the monetary policy maker.arrow_forward
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