Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 35, Problem 1QCMC
To determine
Relationship between inflation and
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The natural unemployment rate and the expected inflation rate are constant when moving along the _______, which shows a trade off between ________ and ________.
A.
aggregate demand curve; inflation; employment
B.
aggregate supply curve; inflation; unemployment
C.
short−run
Phillips curve; inflation; unemployment
D.
short−run
Phillips curve; inflation; employment
E.
long−run
Phillips curve; inflation; unemployment
The Phillips curve is
A.
a positive relationship between price stability and constant, small-increment changes in the fiscal policy on the part of the Fed.
B.
a positive relationship in the long run between the rate of inflation and the rate of unemployment.
C.
a negative relationship between the inflation rate and the unemployment rate, at least in the short run.
D.
a positive relationship between the unemployment rate and the real Gross Domestic Product (GDP) level.
a. A decrease in government spending.
b. An increase in investor confidence.
c. A fall in the Fed’s target inflation rate.
d. A beneficial supply shock.
e. A fall in people’s expectations of inflation.
Chapter 35 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Suppose 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_forwardThe Phillips curve shows that, in the short-run: A. expected changes in aggregate demand produce a positive relationship between inflation and unemployment. B. unexpected changes in aggregate demand produce a positive relationship between inflation and unemployment. C. expected changes in aggregate demand produce an inverse relationship between inflation and unemployment. D. unexpected changes in aggregate demand produce an inverse relationship between inflation and unemployment.arrow_forward1. Fiscal and Monetary policy actions in the short run. Take an example 2. Changes in the AD-AS model and the Phillips curve. Take an example 3. Velocity of money rather than quantity driving prices. Take an example.arrow_forward
- 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 curvearrow_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_forwardeconomic mess has got to be somebody's fault—probably the Prime Minister or National Assembly. A year ago, both inflation and unemployment were lower. We need to vote in some policymakers that know how to get rid of this inflation and unemployment." a. If policymakers increase aggregate demand in response to the supply shock, in what direction will the economy move along the new short-run Phillips curve? What will happen to inflation and unemployment? b. Is there a policy that can immediately reduce both inflation and unemployment? Explain?arrow_forward
- What is true along the long-run Phillips curve? A. A labor shortage exists. B. A tradeoff exists between the inflation rate and the unemployment rate. C. The economy is at full employment. D. The inflation rate equals the expected inflation rate and any unemployment rate is possible.arrow_forwardIf policymakers accommodate an adverse supply shock, then in the short run the unemployment rate a. and the inflation rate fall. b. and the inflation rate rise. c. rises and the inflation rate falls. d. falls and the inflation rate rises.arrow_forwardEconomics FRQarrow_forward
- 1 . Aggregate demand, aggregate supply, and the Phillips curve In the year 2023, aggregate demand and aggregate supply in the fictional country of Drooble are represented by the curves AD2023 AD 2023 and AS on the following graph. OPTIONS: Blank 1: Outcome A/Outcome B Blank 2: 2.94%, 0.98%, 5%, 3% Blank 3: movement along/shift Blank 4/5: a decrease/an increasearrow_forwardEverything else held constant, a change in workers' expectations about inflation will cause to change. Select one: a. the production function b. short-run aggregate supply c. aggregate demand d. long-run aggregate supplyarrow_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_forward
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