Mod 5.2: The Phillips Curve

The short-run Phillips curve shows what relationship between the inflation rate and the unemployment rate?

• positive

• negative

• direct

• none

• variable

Bringing down inflation that has become embedded in expectations is called:

• deflation

• negative inflation

• anti-inflation

• unexpected inflation

• disinflation

Which of the following will cause the short-run Phillips curve to shift to the left (down)?

• a positive supply shock

• a negative demand shock

• an increase in inflation expectations

• an increase in energy prices

• an increase in government spending

Which of the following will cause the short-run Phillips curve to shift to the right (up)? (CHOOSE 2)

• a positive supply shock

• a positive demand shock

• an increase in inflation expectations

• an increase in oil prices

• a decrease in government spending

The long-run Phillips curve is:

• downward sloping because of the relationship between demand and price level

• upward sloping because of the relationship between supply and sticky wages

• vertical because the economy moves to the natural rate of unemployment

• horizontal because of the impact of the money supply on aggregate price level

• upward sloping because of the relationship between the real interest rate and investment spending

Long-run equilibrium unemployment in the Philips curve model corresponds to which of the following? (SELECT ALL THAT APPLY)

• The intersection of the SRPC and the LRPC

• The actual rate of unemployment

• The natural rate of unemployment

• The full-employment level of output

• Inflation expectations