5.1-5.2 Phillips Curve Practice

5.1-5.2 Phillips Curve Practice

Let's Review!
Policy Combinations Topic 5.1

Multiple Choice

Sell bonds, raise reserve requirement, Increase IOR, Increase Taxes

• Fight Inflation

• Fight Unemployment

Multiple Choice

Lower Reserve Requirement, Buy Bonds, Decrease IOR, Decrease Transfer Payments

• Increase Interest Rates

• Decrease Interest Rates

Multiple Choice

Decrease deficit, decrease transfer payment, raise the discount rate, sell bonds, raise taxes

• Increase Aggregate Demand

• Decrease Aggregate Demand

Multiple Choice

Decrease IOR, Increase deficit, increase transfer payment, decrease the discount rate, buy bonds

• Increase Aggregate Demand

• Decrease Aggregate Demand

Multiple Choice

Buy Bonds, Decrease IOR, Increase Transfer Payments

• Fight Inflation

• Fight Unemployment

Multiple Choice

Decrease IOR, decrease deficit, decrease transfer payment, decrease the discount rate, buy bonds, increase money supply

• Increase Investment

• Decrease Investment

Multiple Choice

Lower discount rate, decrease interest on reserves, decrease spending, increase money supply

• Increase Bond Prices

• Decrease Bond Prices

Fill in the Blanks- Critical relationships on the Phillips Curve Graph

Multiple Choice

An economy is _________ operating somewhere along the SRPC

• always

• sometimes

• never

Multiple Choice

According to the Phillips curve, there is

• a trade-off in inflation and unemployment in the short run, but not the long run.

• a trade-off in inflation and unemployment in both short and long run.

• no trade-off in inflation and unemployment in both short and long run.

• a trade-off in inflation and unemployment in the long run, but not the short run.

Multiple Choice

The long run Philips curve is also known as the

• real output rate

• natural rate of inflation

• natural unemployment rate

• real interest rate

Multiple Choice

The y axis when drawing a Philips Curve graph is labeled as the

• unemployment rate

• price level

• real output

• inflation rate

Multiple Choice

Which of the following causes a shift in the long run Philips curve?

• Any changes to aggregate supply.

• Any changes to aggregate demand.

• Any changes in frictional or structural unemployment

• All of the above

5.2 The Phillips Curve in Action
Revising our thinking and explaining our reasoning

Multiple Choice

Which of the following causes a shift in the short run Phillips curve?

• Any changes to aggregate supply.

• Any changes to aggregate demand.

• Any changes in frictional or structural unemployment

• All of the above

Multiple Choice

Which of the following causes movement along the short run Phillips curve?

• Any changes to aggregate supply.

• Any changes to aggregate demand.

• Any changes in frictional or structural unemployment

• All of the above

Multiple Choice

The Short-Run Phillips curve and SRAS are a _____ image of each other.

• mirror

• perfect

• identical

• not related

Open Ended

On the Phillips Curve, points to the left of long-run equilibrium represent inflationary gaps, while points to the right of long-run equilibrium represent recessionary gaps. Explain WHY.

Multiple Choice

Use the graph of a Phillips Curve to answer the question. Which of the following points illustrates an inflationary gap?

• X

• Y

• Z

Multiple Select

Choose all that apply if the economy is currently operating at Q.

• recession

• overextended

• short run equilibrium

• sticky or fixed wages and input costs

• Flexible or adjusted input costs or expected/anticipated

Multiple Choice

______ Shocks correspond to movement along the SRPC

• Demand

• Supply

Multiple Choice

_______ shocks correspond to shifts of the SRPC

• supply

• demand

Let's Practice- Don't forget your LACES!

Suppose that policymakers increase government spending resulting in full employment. Show the result of this fiscal policy action on both graphs. Label this new equilibrium point “B”. Identify what

happens to inflation and unemployment in the short-run. 

Multiple Select

What happened to inflation and unemployment? Select all that apply)

• Increase Inflation

• Decrease inflation

• Increase unemployment

• Decrease unemployment

Let's Practice- Continue on the same graphs

Suppose that policymakers now cut consumer taxes resulting in a positive output gap. Show the result of this fiscal policy action on both graphs. Label the new equilibrium point “C”. Identify what happens to employment in the short-run. Explain.

Multiple Choice

The rate of EMPLOYMENT will

• Increase

• Decrease

Let's Practice!

• Copy down this graph

• For each of the next slides, we'll be using this graph.

• Make sure to label each point.

You may want to have a notebook open to the AD/AS Shifters!!!

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

There is a decrease in consumer spending

• A

• B

• C

• D

• E

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

There is an increase in the expected rate of inflation

• A

• B

• C

• D

• E

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

There is an increase in net exports

• A

• B

• C

• D

• E

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

There is an increase in wages

• A

• B

• C

• D

• E

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

Energy prices decrease

• A

• B

• C

• D

• E

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

There is an increase in government spending

• A

• B

• C

• D

• E

Multiple Choice

Read the scenario below and place and use the Phillips Curve to locate the point where the new inflation rate and unemployment rate would most likely be.

Gross investment decreases

• A

• B

• C

• D

• E

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