Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 31, Problem 5IAPA
To determine
To explain:
The relationship between the short-run
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An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.
Draw the short-run and long-run Phillips curve. Label three points representing a recessionary gap, and inflationary gap, and full employment output. Identify what happens to the short-run Phillips curve when there is a change in aggregate demand and when there is a change in aggregate supply.
The inflation rate is 2 percent a year, and the quantity of money is growing at a pace that will maintain that inflation rate. The natural unemployment rate is 7 percent, and the current unemployment rate is 9 percent. In what direction will the unemployment rate change? How will the short-run Phillips curve and the long-run Phillips curve shift?
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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- An increase in aggregate demand, for a given short-run aggregate supply curve, should lead to which of the following results relating to the Phillips curve? A move onto the vertical long-run Phillips curve An increase in both unemployment and inflation An inward shift of the Phillips curve as inflationary expectations decrease A move up the short-run Phillips curve, with less unemployment and more inflation An outward shift in the Phillips curve as inflationary expectations immediately increasearrow_forwardDoes the Phillips curve have a positive or negative slope? Explain how this slope is derived. When will an increase in aggregate demand not result in lower unemployment rates in the short run?arrow_forwardHow does the short-run Phillips curve reflect an increase in the price of oil such as occurred in the early 1970s? as a leftward shift in the short-run Phillips curve as a rightward shift in the short-run Phillips curve as a downward movement along the short-run Phillips curve as an upward movement along the short-run Phillips curvearrow_forward
- In the decade through 2020, inflation was consistently low. If people adjusted their inflation expectations to their actual inflation experience, this would shift the short-run Phillips curve down. shift the short-run Phillips curve up. shift the long-run Phillips curve to the left. Shift the long-run Phillips curve to the right.arrow_forwardAs with demand and supply analysis, changes in the economy can cause both shifts of and movements along the short-run Phillips curve. Which of the following would cause a shift of the short-run Phillips curve? Check all that apply. An increase in government spending A decrease in short-run aggregate supply An increase in the expected inflation ratearrow_forwardWhich of the following is true about the Phillips curve? Group of answer choices The empirical relationship between unemployment and inflation in the US disappeared after the 1970s. This means that the theoretical Phillips curve does not represent the world well. For a researcher to identify the theoretical Phillips curve from empirical data, the economy must be subject to supply shocks. The empirical Phillips curve implies that a government must choose between either low unemployment and high inflation or high unemployment and low inflation. When inflation expectations adjust, the negative empirical correlation between inflation and unemployment might disappear.arrow_forward
- Which of the following is true about the Phillips curve? The empirical relationship between unemployment and inflation in the US disappeared after the 1970s. This means that the theoretical Phillips curve does not represent the world well. For a researcher to identify the theoretical Phillips curve from empirical data, the economy must be subject to supply shocks. The empirical Phillips curve implies that a government must choose between either low unemployment and high inflation or high unemployment and low inflation. When inflation expectations adjust, the negative empirical correlation between inflation and unemployment might disappear.arrow_forwardExplain why the Phillips Curve is drawn to show a positive relationship between aggregate output and inflation, and why a move up the curve to an above equilibrium output level may be followed by an upward shift of the whole curve.arrow_forwardWhich of the following statements most accurately describes the relationship between inflation and unemployment in the United States during this time period? The short-run Phillips curve remained stable. The short-run Phillips curve shifted to the left after actual inflation was lower than expected. The short-run Phillips curve shifted to the right after actual inflation was higher than expected.arrow_forward
- According to the Phillips curve, there is an inverse relationship between inflation and unemployment. It is possible for policymakers to “buy” lower unemployment by allowing higher inflation. Using a Phillips curve, illustrate and explain how nationwide rioting and looting will impact the economy and why this supply shock has implications for policymakersarrow_forwardIf inflationary expectations increase, the Phillips curve will A) become flat B) become vertical C) shift to the left D) shift to the rightarrow_forwardSuppose oil prices rise what happens to the short-run Phillips curve?arrow_forward
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