Question 1

A Phillips curve implies a negative relationship between:

Accepted Answer

The Phillips curve proposes an inverse relationship between inflation and unemployment, where as one increases the other decreases. The other options do not relate to the Phillips curve.

Question 2

Use the following to answer questions Figure: AD-AS Model and the Short-Run Phillips Curve -(Figure: AD-AS Model and the Short-Run Phillips Curve) Look at AD-AS Model and the Short-Run Phillips Curve. If the central bank increases the money supply so that aggregate demand shifts from AD₁ to AD₂, then the inflation rate will be:

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 3

If there has been a downward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

Accepted Answer

A downward movement along the fixed short-run Phillips curve indicates that inflation has decreased while unemployment has increased, which is consistent with a leftward shift of the Aggregate Demand (AD) curve. This shift suggests a decrease in the overall demand for goods and services in the economy, leading to lower inflation and higher unemployment.

Question 4

If there has been an upward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

Accepted Answer

The answer of If there has been an upward movement...

Question 5

Each point on a Phillips curve is a different combination of:

Accepted Answer

The Phillips curve shows the inverse relationship between inflation and unemployment. Each point on the curve represents a different combination of these two variables. Option A is incorrect because the Phillips curve does not directly show quantity or price. Option C is incorrect because it refers to the loanable funds market, which is not directly related to the Phillips curve. Option D is incorrect because it refers to a different economic concept related to personal finance.

Question 6

Expectations of a higher inflation rate shift the short-run aggregate supply curve to the _____, changing the trade-off between inflation and unemployment. As a result, the short-run Phillips curve shifts _____.

Accepted Answer

Expectations of a higher inflation rate shift the short-run aggregate supply curve to the left because producers require higher prices to cover expected increases in costs. This shift worsens the trade-off between inflation and unemployment, leading to higher inflation at each level of unemployment, which is represented by an upward shift in the short-run Phillips curve.

Question 7

If the short-run Phillips curve has shifted upward, the _____ curve has shifted to the _____.

Accepted Answer

When the short-run Phillips curve shifts upward, it means that in the short run, the relationship between inflation and unemployment has become weaker, and it now takes a higher level of unemployment to achieve the same level of inflation. This indicates a decrease in aggregate supply, which means the Short-Run Aggregate Supply (SRAS) curve has shifted to the left.

Question 8

An increase in the expected rate of inflation:

Accepted Answer

An increase in the expected rate of inflation shifts the short-run Phillips curve up because workers and firms begin to expect higher inflation rates and adjust their behavior accordingly. This leads to higher inflation rates for any given level of unemployment.

Question 9

Along a Phillips curve:

Accepted Answer

Along a Phillips curve, the inflation rate and the unemployment rate have an inverse relationship. As unemployment decreases, inflation tends to increase, and as unemployment increases, inflation tends to decrease. Therefore, choice B is the correct answer.

Question 10

If the short-run Phillips curve has shifted downward, the _____ curve has shifted to the _____.

Accepted Answer

The short-run Phillips curve shifting downward implies a decrease in inflation for any given level of unemployment, which can result from an increase in short-run aggregate supply (SRAS). This is represented by the SRAS curve shifting to the right, indicating an increase in production at each price level.

Question 11

The short-run Phillips curve:

Accepted Answer

The short-run Phillips curve is downward sloping because there is a trade-off between inflation and unemployment rates in the short run. This means that as unemployment decreases, inflation increases, and vice versa.

Question 12

Use the following to answer questions 
Figure: Expected Inflation and the Short-Run Phillips Curve
SRPCS1U1B10S1U1B0 is the Phillips curve with an expected inflation rate of zero; SRPCS1U1B12S1U1B0 is the Phillips curve with an expected inflation rate of 2%. 
-(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, no inflation, and no expectation of inflation. If the central bank decreases the money supply such that aggregate demand shifts to the left and unemployment rises to 8%, then inflation will:

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 13

Suppose a fall in commodity prices causes a supply shock. The short-run Phillips curve will:

Accepted Answer

The answer of Suppose a fall in commodity prices causes...

Question 14

If workers expect a lower rate of inflation, the short-run Phillips curve will:

Accepted Answer

A lower expected rate of inflation means that workers will demand lower wage increases, which will lead to a decrease in the cost-push inflationary pressure and shift the short-run Phillips curve down.

Question 15

Use the following to answer questions Figure: AD-AS Model and the Short-Run Phillips Curve -(Figure: AD-AS Model and the Short-Run Phillips Curve) Look at the figure AD-AS Model and the Short-Run Phillips Curve. If the central bank increases the money supply so that aggregate demand shifts from AD₁ to AD₂, then real GDP will increase by:

Accepted Answer

The increase in aggregate demand from AD₁ to AD₂ shifts the AD curve to the right. As a result, the equilibrium point moves from point A to point B, which leads to an increase in both the price level and real GDP. Since the distance between points A and B on the horizontal axis represents a 4% increase in real GDP, the answer is C.

Question 16

The negative relationship between the inflation rate and the unemployment rate is known as the:

Accepted Answer

The negative relationship between inflation rate and unemployment rate is known as the short-run Phillips curve. This relationship suggests that as inflation rises, unemployment falls, and vice versa. The curve is said to be "short-run" because it only holds in the short-term due to shifts in aggregate demand and supply.

Question 17

The notion that there is a trade-off between inflation and unemployment is expressed as a _____ curve.

Accepted Answer

The Phillips curve shows the inverse relationship between inflation and unemployment, suggesting that policymakers must choose between the two. As inflation rises, unemployment falls and vice versa. This concept was proposed by economist A.W. Phillips in the 1950s.

Question 18

Use the following to answer questions 
Figure: Expected Inflation and the Short-Run Phillips Curve
SRPCS1U1B10S1U1B0 is the Phillips curve with an expected inflation rate of zero; SRPCS1U1B12S1U1B0 is the Phillips curve with an expected inflation rate of 2%. 
-(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, no inflation, and no expectation of inflation. If the central bank increases the money supply such that aggregate demand shifts to the right and unemployment falls to 4%, then inflation will:

Accepted Answer

The initial point is on the SRPC₀ curve, which corresponds to an expected inflation rate of zero. When aggregate demand shifts to the right, unemployment falls to 4%, and the economy moves to a point on the SRPC₂ curve, which corresponds to an expected inflation rate of 2%. Therefore, inflation will rise to 2%.

Question 19

Suppose that the unemployment rate rises as the inflation rate declines. This situation is consistent with a movement along the _____ Phillips curve.

Accepted Answer

The negatively sloped Phillips curve shows an inverse relationship between inflation and unemployment. As the inflation rate declines, there is a movement along the curve resulting in a rise in unemployment.

Question 20

Use the following to answer questions Figure: AD-AS Model and the Short-Run Phillips Curve -(Figure: AD-AS Model and the Short-Run Phillips Curve) Look at AD-AS Model and the Short-Run Phillips Curve. If the central bank decreases the money supply so that aggregate demand shifts from AD₂ to AD₁, then the unemployment rate will be:

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Quiz 28: Inflation, Disinflation, and Deflation

A Phillips curve implies a negative relationship between:

If there has been a downward movement along the fixed short-run Phillips curve, the _ curve has shifted to the _.

If there has been an upward movement along the fixed short-run Phillips curve, the _ curve has shifted to the _.

Each point on a Phillips curve is a different combination of:

Expectations of a higher inflation rate shift the short-run aggregate supply curve to the _, changing the trade-off between inflation and unemployment. As a result, the short-run Phillips curve shifts _.

If the short-run Phillips curve has shifted upward, the _ curve has shifted to the _.

An increase in the expected rate of inflation:

Along a Phillips curve:

If the short-run Phillips curve has shifted downward, the _ curve has shifted to the _.

The short-run Phillips curve:

Suppose a fall in commodity prices causes a supply shock. The short-run Phillips curve will:

If workers expect a lower rate of inflation, the short-run Phillips curve will:

The negative relationship between the inflation rate and the unemployment rate is known as the:

The notion that there is a trade-off between inflation and unemployment is expressed as a _____ curve.

Suppose that the unemployment rate rises as the inflation rate declines. This situation is consistent with a movement along the _____ Phillips curve.