Phillips Curve DP2

1. What does the Phillips Curve describe in economics?

• The relationship between inflation and unemployment
• The supply and demand for consumer goods
• The impact of government spending on GDP
• The theory of comparative advantage

2. According to the Phillips Curve, when inflation is low, what is the likely status of unemployment?

• High unemployment
• Low unemployment
• No relationship to unemployment
• Uncertain

3. In the short run, the Phillips Curve suggests that there is a trade-off between what two economic variables?

• Inflation and government spending
• Inflation and interest rates
• Inflation and unemployment
• Unemployment and economic growth

4. What is the key idea of the Phillips Curve?

• There is an inverse relationship between inflation and unemployment in the short run
• There is a positive relationship between inflation and unemployment
• There is no relationship between inflation and unemployment
• Inflation is always higher than unemployment

5. In the long run, according to the Phillips Curve, what happens to the trade-off between inflation and unemployment?

• It remains the same
• It reverses, and there is no trade-off
• It becomes more favorable for policymakers
• It becomes more volatile

6. What is the term for the level of unemployment at which there is no cyclical unemployment, and all that remains is structural and frictional unemployment?

• Natural rate of unemployment
• Inflation rate
• Full employment
• Seasonal unemployment

7. When the economy operates at full employment, what is the unemployment rate expected to be?

• High
• Low
• Zero
• Unpredictable

8. What is the primary factor that shifts the Phillips Curve to the right, making the trade-off less favorable?

• A decrease in inflation expectations
• A decrease in inflation
• A decrease in unemployment
• A decrease in government spending

9. If an economy experiences a negative supply shock, what is the likely effect on the Phillips Curve trade-off?

• It shifts to the left, making it more favorable
• It shifts to the right, making it less favorable
• It remains unchanged
• It disappears entirely

10. Which economist is credited with introducing the concept of the Phillips Curve?

• John Maynard Keynes
• Milton Friedman
• Paul Samuelson
• A.W. Phillips