Question 1

If inflation expectations rise,the short-run Phillips curve shifts

Accepted Answer

If inflation expectations rise, firms will expect higher prices for their goods and services and will raise their prices. This leads to a higher level of inflation. As a result, the Phillips curve shifts to the right, indicating that at any level of unemployment, the inflation rate is higher than before. In this case, if inflation remains the same, unemployment will also rise due to the shift in the Phillips curve. Therefore, the correct answer is D.

Question 2

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.In the short-run the effects of the housing and financial crises

Accepted Answer

The housing and financial crises lead to a decrease in demand and investment, which will lead to a decrease in production and employment. This decrease in employment will lead to an increase in the unemployment rate. At the same time, due to the decrease in demand, there will be a decrease in prices, leading to a reduction in the inflation rate. Therefore, the short-run effects of the housing and financial crises are likely to reduce the inflation rate and raise the unemployment rate.

Question 3

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.The short-run effects of rising world commodity are shown by

Accepted Answer

Rising world commodity prices would cause an increase in the cost of production, leading to a rise in prices and a decrease in output, shifting the short-run Phillips curve to the right.

Question 4

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government,then which,if any,curve(s)shift left?

Accepted Answer

If Southlanders believe that the government is committed to reducing inflation to 12.5%, they will adjust their expectations of future inflation accordingly. This will shift the short-run Phillips curve to the left as inflation expectations have decreased, but it will not shift the long-run Phillips curve since the government's announcement does not directly affect the natural rate of unemployment or potential output in the economy.

Question 5

Refer to Monetary Policy in Southland.Suppose Southland has had the same inflation rate for a long time.Which,if either,of the following ideas imply that the unemployment rate in Southland would be above the natural rate.

Accepted Answer

The answer of Refer to Monetary Policy in Southland.Suppose Southland...

Question 6

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.The short-run effects of the housing and financial crisis are shown by

Accepted Answer

The answer of Figure
The Economy in 2008
In the first half...

Question 7

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.Given the effects of the financial and housing crisis on the price level and output and the effects of increased world commodity prices on the price level and output,the aggregate demand and aggregate supply model tells us that

Accepted Answer

The financial and housing crisis is a negative shock to aggregate demand, causing a decrease in output. The increase in world commodity prices is a negative shock to aggregate supply, causing a decrease in output and an increase in the price level. Therefore, the AD-AS model predicts a decrease in output and an ambiguous effect on the price level. Option C is the only one that reflects this.

Question 8

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

Accepted Answer

The answer of If a central bank attempts to lower...

Question 9

The monetary-policy framework called inflation targeting is used explicitly by

Accepted Answer

Inflation targeting is used by most major countries except the United States and Japan.

Question 10

Considering a plot of the inflation rate and the unemployment rate,one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Accepted Answer

The answer of Considering a plot of the inflation rate...

Question 11

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.In the short run the increased prices of world commodities

Accepted Answer

The increased prices of world commodities would lead to a rise in production costs, which would then lead to a decrease in output in the short run. This decrease in output would also be accompanied by a rise in the price level due to the increased cost of production. Therefore, the correct choice is B - raise the price level and reduce output.

Question 12

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government then which,if any,curve(s)shift left?

Accepted Answer

If Southlanders believe that the government is committed to reducing inflation to 12.5%, they will adjust their expectations of future inflation accordingly. This will shift the short-run Phillips curve to the left as inflation expectations have decreased, but it will not shift the long-run Phillips curve since the government's announcement does not directly affect the natural rate of unemployment or potential output in the economy.

Question 13

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%.Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%.Then

Accepted Answer

The answer of Refer to Monetary Policy in Southland.Suppose that...

Question 14

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

According to Friedman and Phelps, if a country pursues a disinflationary policy that the public does not find completely credible, there may be a temporary increase in unemployment as workers adjust their expectations and wages. However, over time, as expectations adjust and wages become more flexible, the economy should return to its natural rate of unemployment. Therefore, the best choice is B, which suggests that there will be a temporary increase in unemployment followed by a return to the natural rate.

Question 15

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.The effects of the housing and financial crises could be shown by shifting

Accepted Answer

The housing and financial crises would likely reduce consumer and business confidence, leading to a decrease in spending and investment. This would shift aggregate demand to the left.

Question 16

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level.Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%.Then

Accepted Answer

The answer of Refer to Monetary Policy in Southland.Suppose that...

Question 17

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to the Economy in 2008.In the short-run the housing and financial crises

Accepted Answer

In the short-run, the housing and financial crises would likely lead to a decrease in aggregate demand, reducing both the price level and output as consumers and businesses cut back on spending and investment.

Question 18

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to the Economy in 2008.The effects of increased prices of world commodities is shown by shifting

Accepted Answer

The answer of Figure
The Economy in 2008
In the first half...

Question 19

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%.Suppose that the public had expected that the Department of Finance would reduce inflation,but only to 20%.Then

Accepted Answer

The answer of Refer to Monetary Policy in Southland.Suppose that...

Question 20

Other things the same,a country that decides to reduce inflation will

Accepted Answer

When a country decides to reduce inflation, it often adopts contractionary monetary or fiscal policies, which can lead to a decrease in aggregate demand and output, and an increase in unemployment rate in the short run. However, in the long run, as prices adjust and firms become more efficient, the unemployment rate will tend to return to its natural rate. Therefore, the country will have a higher unemployment rate only in the short run.

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

If inflation expectations rise,the short-run Phillips curve shifts

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.In the short-run the effects of the housing and financial crises

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of rising world commodity are shown by

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government,then which,if any,curve(s) shift left?

Refer to Monetary Policy in Southland.Suppose Southland has had the same inflation rate for a long time.Which,if either,of the following ideas imply that the unemployment rate in Southland would be above the natural rate.

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of the housing and financial crisis are shown by

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

The monetary-policy framework called inflation targeting is used explicitly by

Considering a plot of the inflation rate and the unemployment rate,one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.In the short run the increased prices of world commodities

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government then which,if any,curve(s) shift left?

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The effects of the housing and financial crises could be shown by shifting

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to the Economy in 2008.In the short-run the housing and financial crises

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to the Economy in 2008.The effects of increased prices of world commodities is shown by shifting

Other things the same,a country that decides to reduce inflation will