Understanding the Phillips Curve

What does the Phillips curve illustrate in the short run?

• A downward sloping line

• An upward sloping line

• A horizontal line

• A vertical line

Which of the following is true about a recessionary gap?

• It is characterized by high inflation and high unemployment.

• It is characterized by low inflation and high unemployment.

• It is characterized by high inflation and low unemployment.

• It is characterized by low inflation and low unemployment.

What is considered the natural rate of unemployment?

• 0% unemployment

• 10% unemployment

• 2% unemployment

• 5% unemployment

What happens to the Phillips curve when aggregate supply shifts to the left?

• The Phillips curve shifts to the right.

• The Phillips curve shifts to the left.

• There is movement along the Phillips curve.

• The Phillips curve becomes horizontal.

In the long run, what happens when there is an increase in aggregate demand?

• The economy remains in an inflationary gap.

• The economy returns to full employment.

• The economy experiences stagflation.

• The economy experiences a recessionary gap.