Phillips Curve DCO

The Phillips curve suggest that in the short run inflation and unemployment are:

• negatively correlated

• positively correlated

• unrelated

• symmetric

According to the the Philips curve, if the inflation rate increases from 4% to 6%, and we might expect the unemployment rate to

• stay the same

• fall

• rise

• it is impossible to say

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

• unemployment rate

• price level

• real output

• inflation rate

A movement from A to B would represent

• an increase in AS in the AS/AD model.

• a decrease in AS in the AS/AD model.

• stagflation.

• an increase in AD in the AS/AD model.

• a decrease in AD in the AS/AD model.

A movement from B to A on the curve would represent

• an increase in AS in the AS/AD model.

• a decrease in AS in the AS/AD model.

• stagflation.

• an increase in AD in the AS/AD model.

• a decrease in AD in the AS/AD model.

The short run Phillips curve can best be described as showing, in the short run

• the substitution effect.

• the crowding out effect.

• trade off between unemployment and inflation.

• natural rate hypothesis.

Data suggest that, in the LONG run, the relationship between unemployment and inflation is

• a trade off.

• nonexistent.

• negatively correlated

• inverse.

The 1970s 'stagflation'

• shows the Phillips curve always holds in the long run

• shows the Phillips curve does not always holds in the long run

• Is a good example of the trade off between inflation and unemployment.

• Shows the Phillips Curve does not apply in the short run

Which of the following might explain the Phillips Curve

• When unemployment is low, workers can demand higher wages

• In a recession, wages tend to rise

• When unemployment is low, wages are likely to fall

• In a boom, employers can risk making people redundant

Which of the following might help explain the Phillips Curve

• When unemployment is high, consumption rises, pushing up inflation.

• When unemployment is low, consumption rises, pushing up inflation.

• When unemployment is high, consumption falls, pushing up inflation.

• When unemployment is low, consumption falls, reducing inflation.