INTER MACRO: CH 6- AS & Phillips Curve

For many government decision makers, the original Phillips curve implied

A trade-off between lowering unemployment at the cost of higher inflation or lowering inflation at the cost of higher unemployment

Okun's law states that for a 1 percent increase in the unemployment rate above the natural rate of unemployment

GDP falls by about 2%

Suppose an increase in oil prices is accompanied by a decline in the level of potential output. Which of the following is the most likely long-run effect?

Real GDP will decrease but prices will increase

The inverse relationship between inflation and unemployment is called:

The Phillips curve

Restrictive monetary policy will eventually affect the upward-sloping AS curve since:

The resulting unemployment will cause downward pressure on nominal wages, so the cost of the production will decrease

The misery index is constructed by:

adding the inflation rate and the unemployment rate.

In the coordination approach to the Phillips curve, wages are considered to be sticky rather than flexible since:

firms are unsure about their competitors' behavior and only reluctantly change prices and wages following a change in AD

Assume the economy is at full employment. If the Fed accommodates an increase in oil prices by expansionary monetary policy, the most likely long-run effect will be that

****

In the AD-AS model with an upward-sloping AS-curve, what would happen if oil prices increased and the Fed responded by restricting money supply:

****

The upward-sloping AS-curve will shift eventually to the left if

**** markup over labor cost falls