fg

Which of the following accurately portrays the shape of the long-run Phillips curve?

Vertical

The cost of disinflation is the:

loss of real GDP in the process

Use the "Expected Inflation and the Short-Run Phillips Curve" Figure 34-1. Suppose that this economy currently has an unemployment rate of 6%, inflation of 2%, and has an expectation of 2% future inflation. If the central bank decreases the money supply such that aggregate demand shifts to the left and unemployment rises to 8%, then inflation would:

Increase to 4%

There is a zero bound to which of the following interest rates?

Nominal interest rates

Suppose there is supply shock due to a fall in commodity prices, the short-run Phillips curve will:

Shift down

If the economy is in a liquidity trap:

fiscal policy is effective, but monetary policy is not.

During a liquidity trap:

monetary policy is ineffective, since nominal interest rates cannot fall below zero.

The long-run Phillips curve is:

vertical at the non-accelerating-inflation rate of unemployment (NAIRU)