5.2 The Phillips Curve

The Phillips Curve model is used to represent the relationship between ____ and ____

• inflation

• unemployment

• interest rates

The short-run trade-off between inflation and unemployment can be illustrated by the _____ - sloping short-run Phillips Curve (SRPC)

• downward

• upward

• vertical

The economy is _____ operating somewhere along the SRPC

• always

• sometimes

• never

The long-run relationship between inflation and unemployment can be illustrated by the long-run Phillips curve (LRPC), which is ______ at the natural rate of unemployment

• vertical

• upward slowing

• downward sloping

Long-run equilibrium corresponds to the _____ of the SRPC and the LRPC

• intersection

• sectionalism

Points to the left of the long-run equilibrium represent _____ gaps, while points to the right of the long-run equilibrium represent _______

• inflationary, recessionary

• recessionary, inflationary

______ Shocks correspond to movement along the SRPC

• Demand

• Supply

_______ shocks correspond to shifts of the SRPC

• supply

• demand

Factors that cause the _____ to change will cause the LRPC to shift

• natural rate of UE

• demand

• supply