Question 1

Which of the diagrams in the above figure best illustrates a long-run Phillips curve?
A) Figure A
B) Figure B
C) both Figure A and Figure B
D) neither Figure A nor Figure B

Accepted Answer

The answer of Which of the diagrams in the above...

Question 2

The Cleveland Federal Reserve Bank estimates the expected inflation rate is 1.5 percent in 2013. This estimate means that
A) the long-run and short-run Phillips curve cross at an inflation rate of 1.5 percent.
B) the long-run Phillips curve is vertical at 1.5 percent.
C) the short-run Phillips curve is vertical at 1.5 percent.
D) the short-run Phillips curve shifts upward by 1.5 percentage points per year.

Accepted Answer

The answer of The Cleveland Federal Reserve Bank estimates the...

Question 3

If the natural unemployment rate increases, then the short-run Phillips curve shifts ________ and the long-run Phillips curve shifts ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Accepted Answer

The short-run Phillips curve shifts rightward because with a higher natural rate of unemployment, at any given rate of inflation, the unemployment rate is higher. The long-run Phillips curve shifts rightward as well because it is vertical at the natural rate of unemployment, which has increased.

Question 4

An increase in the natural unemployment rate shifts
A) both the short-run and the long-run Phillips curves rightward.
B) the short-run but not the long-run Phillips curve rightward.
C) the long-run but not the short-run Phillips curve rightward.
D) neither the short-run nor the long-run Phillips curve.

Accepted Answer

The answer of An increase in the natural unemployment rate...

Question 5

In Figure B above, which of the following are being held constant while moving along the curve in the figure?
A) the expected inflation rate
B) the natural unemployment rate
C) the AD curve
D) Both answers A and B are correct.

Accepted Answer

The figure shows a Phillips curve, which shows the inverse relationship between unemployment and inflation. As we move along the curve, the expected inflation rate and the natural unemployment rate are both held constant. The AD curve, on the other hand, represents the level of aggregate demand at different price levels and can shift depending on various factors such as changes in consumer confidence or government spending. Therefore, the correct answer is D, as both A and B are being held constant while moving along the curve.

Question 6

Which of the following statements about the long-run Phillips curve is CORRECT?
A) The long-run Phillips curve is horizontal.
B) The long-run Phillips curve shifts leftward if the natural unemployment rate decreases.
C) The long-run Phillips curve shifts rightward and upward if the expected inflation rate increases.
D) The long-run Phillips curve shifts leftward if the natural unemployment rate increases.

Accepted Answer

The answer of Which of the following statements about the...

Question 7

-An economy's natural unemployment rate is 4 percent. The table above gives some points on the economy's short-run Phillips curve. When the unemployment rate is 4 percent ________.
A) actual inflation is greater than expected inflation
B) actual inflation is less than expected inflation
C) and the inflation rate is 6 percent a year, the short-run and long-run Phillips curves intersect
D) and the expected inflation rate is 8 percent a year, the short-run Phillips curve shifts downward

Accepted Answer

When the unemployment rate is at its natural rate, the actual inflation rate equals the expected inflation rate, and this is where the short-run Phillips curve intersects the long-run Phillips curve.

Question 8

-In the above figure, suppose that the economy currently is at point A. If the inflation rate falls and this fall is unanticipated by the public, the economy moves to a point such as point
A) B.
B) C.
C) D.
D) E.

Accepted Answer

When the inflation rate falls and this fall is unanticipated by the public, firms find that their actual costs are lower than they had expected. This situation typically leads to an increase in output and employment as firms take advantage of the lower costs, moving the economy to a point like E, which represents higher output and employment compared to the initial point A.

Question 9

-In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point
A) B.
B) C.
C) D.
D) E.

Accepted Answer

The answer of 
-In the above figure, suppose that the...

Question 10

A decrease in the expected inflation rate shifts the short-run Phillips curve
A) downward and shifts the long-run Phillips curve leftward.
B) upward and shifts long-run Phillips curve rightward.
C) downward and creates a movement downward along the long-run Phillips curve.
D) upward and creates a movement upward along the long-run Phillips curve.

Accepted Answer

A decrease in the expected inflation rate shifts the short-run Phillips curve downward because it reduces the inflation that firms and workers expect in the future, leading to lower wage and price setting in the short run. However, it does not shift the long-run Phillips curve, which is vertical at the natural rate of unemployment; instead, it creates a movement along this curve as the economy adjusts to the new expected inflation rate.

Question 11

The Cleveland Federal Reserve Bank's estimate of expected inflation has fallen from 3.5 percent in 2000 to 1.5 percent in 2013. This fall means that
A) the long-run Phillips curve shifted leftward.
B) the long-run Phillips curve shifted rightward.
C) the long-run Phillips curve shifted downward.
D) None of the above answers are correct because a change in the expected inflation rate does not shift the long-run Phillips curve.

Accepted Answer

The long-run Phillips curve represents the relationship between inflation and unemployment when expectations are fully adjusted. A change in expected inflation does not shift the long-run Phillips curve; it only affects the position on the curve.

Question 12

The government estimates that the natural unemployment rate has increased from 4.8 percent in 2006 to 5.2 percent in late 2012. If these estimates are accurate, the short-run Phillips curve has shifted ________ and the long-run Phillips curve has shifted ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Accepted Answer

The short-run Phillips curve shifts rightward because a higher natural unemployment rate suggests a weaker economy or less demand for labor at any given inflation rate. The long-run Phillips curve remains vertical at the natural rate of unemployment, so if the natural rate increases, the long-run Phillips curve shifts rightward as well, reflecting the higher natural unemployment rate.

Question 13

The short-run Phillips curve and the long-run Phillips curve intersect at the ________ and ________.
A) expected inflation rate; the expected unemployment rate
B) expected inflation rate; the natural unemployment rate
C) natural inflation rate; the expected employment rate
D) expected inflation rate; the expected employment rate

Accepted Answer

The short-run Phillips curve shows the relationship between inflation and unemployment in the short run, while the long-run Phillips curve shows the relationship between inflation and unemployment in the long run, after all the temporary factors affecting inflation have worked themselves out. The natural unemployment rate represents the rate of unemployment consistent with a stable rate of inflation, which is determined by structural factors in the economy. Thus, the short-run Phillips curve can shift up or down depending on changes in expected inflation, while the long-run Phillips curve is vertical at the natural unemployment rate. Therefore, they intersect at the expected inflation rate and the natural unemployment rate.

Question 14

-In the above figure, what might have shifted the short-run Phillips curve from SRPC? to SRPC? while leaving the long-run Phillips curve unchanged at LRPC?
A) The natural unemployment rate increased.
B) The natural unemployment rate decreased.
C) The expected inflation rate increased.
D) The expected inflation rate decreased.

Accepted Answer

The expected inflation rate increased, which would shift the short-run Phillips curve to the right, reflecting higher inflation at every level of unemployment, without altering the long-run Phillips curve, which is vertical at the natural rate of unemployment.

Question 15

An increase in the expected inflation rate shifts
A) both the short-run and the long-run Phillips curves upward.
B) the short-run but not the long-run Phillips curve upward.
C) the long-run but not the short-run Phillips curve upward.
D) neither the short-run nor the long-run Phillips curve.

Accepted Answer

The short-run Phillips curve shifts upward with an increase in expected inflation because it reflects the negative relationship between unemployment and inflation in the short term. However, the long-run Phillips curve is vertical, indicating no trade-off between inflation and unemployment in the long run, and thus it does not shift with changes in expected inflation.

Question 16

The short-run Phillips curve intersects the long-run Phillips curve at the
A) natural interest rate.
B) nominal interest rate.
C) natural inflation rate.
D) expected inflation rate.

Accepted Answer

The short-run Phillips curve intersects the long-run Phillips curve at the expected inflation rate. This intersection point represents the inflation rate that economic agents expect to prevail, which aligns with the long-run scenario where the actual inflation rate matches expectations, and there is no trade-off between inflation and unemployment.

Question 17

A change in the natural unemployment rate ________.
A) shifts only the short-run Phillips curve
B) causes a movement along the short-run Phillips curve
C) shifts only the long-run Phillips curve
D) shifts both the short-run and long-run Phillips curves

Accepted Answer

The answer of A change in the natural unemployment rate...

Question 18

An economy's natural unemployment rate is 4 percent. The table above gives some points on the economy's short-run Phillips curve. If the expected inflation rate becomes 8 percent per year, then the ________.
A) short-run Phillips curve shifts upward
B) long-run Phillips curve shifts rightward
C) long-run Phillips curve shifts leftward
D) short-run Phillips curve shifts downward

Accepted Answer

According to the Phillips curve, there is an inverse relationship between unemployment and inflation in the short run. An increase in expected inflation leads to an increase in actual inflation, which causes firms to raise prices and hire more workers in the short run, leading to a downward movement along the Phillips curve. However, in the long run, the natural rate of unemployment is not affected by changes in expected inflation, and the Phillips curve shifts upward. Therefore, the answer is (A) short-run Phillips curve shifts upward.

Question 19

-In the above figure, which of the following curves represents the long-run Phillips curve?
A) 1
B) 2
C) 3
D) 4

Accepted Answer

The answer of 
-In the above figure, which of the...

Question 20

-Which of the diagrams in the above figure best illustrates a short-run Phillips curve?
A) Figure A
B) Figure B
C) both Figure A and Figure B
D) neither Figure A nor Figure B

Accepted Answer

The answer of 
-Which of the diagrams in the above...

Quiz 12: The Business Cycle, Inflation, and Deflation

Which of the diagrams in the above figure best illustrates a long-run Phillips curve?

The Cleveland Federal Reserve Bank estimates the expected inflation rate is 1.5 percent in 2013. This estimate means that

If the natural unemployment rate increases, then the short-run Phillips curve shifts and the long-run Phillips curve shifts .

An increase in the natural unemployment rate shifts

In Figure B above, which of the following are being held constant while moving along the curve in the figure?

Which of the following statements about the long-run Phillips curve is CORRECT?

-An economy's natural unemployment rate is 4 percent. The table above gives some points on the economy's short-run Phillips curve. When the unemployment rate is 4 percent ________.

-In the above figure, suppose that the economy currently is at point A. If the inflation rate falls and this fall is unanticipated by the public, the economy moves to a point such as point

-In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point

A decrease in the expected inflation rate shifts the short-run Phillips curve

The Cleveland Federal Reserve Bank's estimate of expected inflation has fallen from 3.5 percent in 2000 to 1.5 percent in 2013. This fall means that

The government estimates that the natural unemployment rate has increased from 4.8 percent in 2006 to 5.2 percent in late 2012. If these estimates are accurate, the short-run Phillips curve has shifted and the long-run Phillips curve has shifted .

The short-run Phillips curve and the long-run Phillips curve intersect at the and .

-In the above figure, what might have shifted the short-run Phillips curve from SRPC? to SRPC? while leaving the long-run Phillips curve unchanged at LRPC?

An increase in the expected inflation rate shifts

The short-run Phillips curve intersects the long-run Phillips curve at the

A change in the natural unemployment rate ________.

An economy's natural unemployment rate is 4 percent. The table above gives some points on the economy's short-run Phillips curve. If the expected inflation rate becomes 8 percent per year, then the ________.

-In the above figure, which of the following curves represents the long-run Phillips curve?

-Which of the diagrams in the above figure best illustrates a short-run Phillips curve?