MacroEcon Midterm #4 Part 1
Cost-push inflation starts with
A decrease in short-run aggregate supply
In the short run, an unexpected increase in the inflation rate leads to
A lower unemployment rate
The long-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when the
Actual inflation rate equals the expected inflation rate
Demand pull inflation can be started by
An increase in exports
Demand pull inflation can be started by
An increase in government expenditure
Cost-push inflation can start with
An increase in oil prices
Cost-push inflation might initially result from
An increase in the cost of resources
Oil prices increase sharply, raising the price level and decreasing real GDP. The Fed has an incentive to
Increase the quantity of money in order to reduce unemployment
The long-run Phillips curve
Is vertical
Suppose a shock causes the aggregate demand curve to shift rightward. If the Feds do nothing ...
Output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level
The short-run Phillips curve
Slopes downward
The Phillips curve shows the relationship between
The unemployment rate and the inflation rate
Stagflation is the combination of a ___ and ___
price level rising; a decreasing real GDP