Phillips Curve Review

Which of the following policy combinations will be the most effective in closing a recessionary gap?

• decreasing administered interest rates; increasing income taxes

• decreasing administered interest rates; increasing government spending

• increasing cash reserve ratio; decrease income taxes

• sell government bonds; increase government spending

The Phillips curve shows what type of relationship between inflation and unemployment?

• inverse

• positive

• parabolic

• symmetric

What is crowding out?

• An decrease in consumption due to higher interest rates from expansionary fiscal policy.

• A decrease to net exports due to higher interest rates from expansionary fiscal policy.

• A decrease to investment due to higher interest rates from expansionary fiscal policy.

According to the Long-Run Phillips curve, which of the following is true?

• The natural rate of unemployment is independent of inflation

• Unemployment increases with an increase in inflation

• Unemployment decreases with an increase in inflation

• Unemployment decreases with a decrease in inflation

When government spending causes an increase in real interest rates,

• gross private domestic investment will not change

• gross private domestic investment will experience crowding out

• gross private domestic investment will increase and cause economic growth

• gross private domestic investment will increase the amount of capital stock in an economy

A decrease in interest rates resulting in the increase in capital stock will likely cause which of the THREE following in the long run?

• Decrease in AD

• Increase in AD

• Decrease in SRAS

• Increase in SRAS

• Increase in LRAS

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

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

When drawing the long run Philips Curve, you would show it by

• a horizontal line along the y axis.

• a vertical line along the x axis

• a downwards sloping line

• an upwards sloping line

A decrease in AD would cause a(n)

• downward movement on the Phillips Curve.

• upwards movement on the Phillips Curve.

• a rightward shift of the Phillips Curve.

• a leftward shift of the Phillips Curve.

• stagflation.