If people's inflation expectations rise, the short-run Phillips curve will: a) Shift left b) Shift right c) experience a downwards movement along the existing curve d) experience a upwards movement along the existing curve
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- For each of the following scenarios, illustrate the effects of the development on both the short-run and long-run Phillips curves (SRPC and LRPC, respectively). 1. There is a fall in the natural rate of unemployment. 2. There is a decline in expected inflation. 3. There is a fall in government spending. 4. There is a rise in the price of imported oil.As with demand and supply analysis, changes in the economy can cause both shifts of and movements along the short-run Phillips curve. Which of the following would cause a shift of the short-run Phillips curve? Check all that apply. An increase in government spending A decrease in short-run aggregate supply An increase in the expected inflation rateSuppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADAADA to ADBADB. This would cause a (move along , shift of) the short-run Phillips curve, resulting in (increase, decrease) in the inflation rate and (increase, decrease) in the unemployment rate.
- You observe the following short-run Phillips curve for the economy: T = 9.2 -0.26(u - 6.5%) + v. There are no supply shocks to the economy, and the actual unemployment rate is 6.5% (and will stay that way for the foreseeable future). What will expected inflation be next year? Write your answer as a percentage, and round at one (1) decimal. Do not write the percentage sign. If you need more information to answer the question, write "O".The following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as (deflation/disinflation) . To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of ____% True or False: If people have rational expectations, the economy may not have to endure an unemployment rate as high as predicted by the short-run Phillips curve. -True -FalseThe following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as (deflation/disinflation) . To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of____% True or False: If people have rational expectations, the economy may not have to endure an unemployment rate as high as predicted by the short-run Phillips curve. -True -False .
- According to the St. Louis Federal Reserve the natural unemployment rate is 4.42 percent (Q4 2023 ) and the U.S. Bureau of Labor Statistics (BLS) estimates the U.S. unemployment rate (U3, October 2023 B) to be 3.9 percent. If you expect unemployment to continue to fall the short-run Phillips curve would predict: OA decrease in the inflation rate. An increase in the inflation rate. ○ A decrease in the unemployment rate. ○ An increase in the unemployment rate.According to Modern Phillips Curve Theory, an increase in the sensitivity of inflation to changes in real GDP results in: (a) lower Durbin-Watson statistics across econometric estimations; (b) a movement to the left of the long-run aggregate supply curve; (c) decreased employment volatility over several economic cycles; (d) more inflationTrue or false? An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.
- Which of the following would shift the long-run Phillips curve to the left? a) A change in the expected rate of inflation. b) A natural disaster which temporarily disrupts production. c) Improved technology which increases labour demand. d) A rise in the price of imported inputs.Note:Hand written solution is not accepted.Consider a typical downward sloping short run Phillips curve. Which combination of events could cause 1) a movement along the particular short run Phillips curve (SRPC) to the "south-east" and then followed by 2) a leftward shift of the entire SRPC? Group of answer choices a)Decrease in government spending followed by a rightward shift in the short-run aggregate supply curve. b) Increase in money supply followed by a rightward shift in the short-run aggregate supply curve. c)Decrease in government spending followed by a leftward shift in the short-run aggregate supply curve. d)Increase in government spending followed by a rightward shift in the short-run aggregate supply curve.
