Econ chapter 13

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are downward pressures on prices and wages. downward pressures on prices and upward pressures on wages. upward pressures on prices and downward pressures on wages. upward pressures on prices and wages.

downward pressures on prices and wages.

If consumption expenditures fall, then in the short run inflation and unemployment rise. inflation rises and unemployment falls. inflation falls and unemployment rises inflation and unemployment fall.

inflation falls and unemployment rises

As aggregate demand shifts left along the short-run aggregate supply curve, inflation and unemployment are higher. inflation is higher and unemployment is lower. unemployment is higher and inflation is lower. unemployment and inflation are lower.

unemployment is higher and inflation is lower.

According to the long-run Phillips curve, in the long run monetary policy influences inflation but not the unemployment rate; this is consistent with classical theory. inflation but not the unemployment rate; this is inconsistent with classical theory. the unemployment rate but not inflation; this is consistent with classical theory. the unemployment rate but not inflation; this is inconsistent with classical theory.

inflation but not the unemployment rate; this is consistent with classical theory.

In the long run, the natural rate of unemployment depends primarily on the level of aggregate demand. inflation depends primarily upon the money supply growth rate. there is a tradeoff between the inflation rate and the natural rate of unemployment. All of the above are correct.

inflation depends primarily upon the money supply growth rate.

If taxes rise, then aggregate demand shifts right, making unemployment higher than otherwise. right, making unemployment lower than otherwise. left, making unemployment higher than otherwise. left, making unemployment lower than otherwise.

left, making unemployment higher than otherwise

In order to maintain stable prices, a central bank must maintain low interest rates. keep unemployment low. tightly control the money supply. sell indexed bonds.

tightly control the money supply.

A. W. Phillips' findings were based on data from 1861-1957 for the United Kingdom. from 1861-1957 for the United States. mostly from the post-World War II period in the United Kingdom. mostly from the post-World War II period in the United States.

from 1861-1957 for the United Kingdom.

A vertical long-run Phillips curve is consistent with the conclusion of Friedman and Phelps, but it is not consistent with the classical idea of monetary neutrality. the classical idea of monetary neutrality, but it is not consistent with the conclusion of Friedman and Phelps. both the conclusion of Friedman and Phelps and the classical idea of monetary neutrality. neither the conclusion of Friedman and Phelps nor the classical idea of monetary neutrality.

both the conclusion of Friedman and Phelps and the classical idea of monetary neutrality.

According to the Phillips curve, policymakers can reduce inflation by contracting aggregate demand. This contraction results in a temporarily higher unemployment rate. contracting aggregate demand. This contraction results in a temporarily lower unemployment rate. expanding aggregate demand. This expansion results in a temporarily lower unemployment rate. expanding aggregate demand. This expansion results in a temporarily higher unemployment rate.

contracting aggregate demand. This contraction results in a temporarily higher unemployment rate.

The misery index is supposed to measure the social cost of unemployment. health of the economy. lost output associated with a particular unemployment rate. short-run tradeoff between inflation and unemployment.

health of the economy.

One determinant of the long-run average unemployment rate is the market power of unions, while the inflation rate depends primarily upon government spending. minimum wage, while the inflation rate depends primarily upon the money supply growth rate. rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions. existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive.

minimum wage, while the inflation rate depends primarily upon the money supply growth rate.

According to classical macroeconomic theory, in the long run monetary growth affects both real and nominal variables. the only real variable affected by monetary growth is the unemployment rate. a number of factors that affect unemployment are influenced by monetary growth. monetary growth affects nominal but not real variables.

monetary growth affects nominal but not real variables.

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have reduced inflation and unemployment. raised inflation and unemployment. reduced inflation and raised unemployment. raised inflation and reduced unemployment.

raised inflation and reduced unemployment.

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have raised inflation and unemployment. raised inflation and reduced unemployment. reduced inflation and raised unemployment. reduced inflation and unemployment.

raised inflation and reduced unemployment.