Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 35, Problem 2QCMC
To determine
Shift in the Philips curve .
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What is the effect of an increase in aggregate demand on the short-run Phillips curve?
When aggregate demand increases, _______.
A.
the short-run Phillips curve shifts upward
B.
the short-run Phillips curve shifts downward
C.
a movement occurs upward along the short-run Phillips curve
D.
a movement occurs downward along the short-run Phillips curve
The accompanying graph depicts the Short-Run Phillips
O Curve (SRPC) when the public expects no inflation in the
economy.
Macmillan Learning
a. According to this SRPC, what would inflation be if
unemployment is 9%?
0
Incorrect
b. Please move the SRPC line to reflect what would happen if
the public's inflation expectations increased so that they now
expect the inflation rate to increase by 2%.
c. If the unemployment rate is still 9%, what is the new
inflation rate after this change in expectations?
%
2
%
Inflation rate (%)
7
6
5
4
3
2
1
0
-1
-2
-3
0 1
SRPC
2
3
4 5 6
Unemployment rate (%)
7
8
9
10
How do you know if the Fed's actions achieve the goal of stable prices?
The goal of stable prices is achieved when _______.
A.
the prices of food, clothing, and shelter are stable
B.
the PCEPI inflation rate excluding food and energy prices is 2 percent a year
C.
the general level of prices is changing, but we can accurately predict the rate of change
D.
the inflation rate is zero percent a year
Chapter 35 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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Similar questions
- QUESTION 18 According to the quantity theory of money, an increase in long-run real GDP inflation with rising real GDP. This is because the quantity theory is a A. reduces; does not move; Keynesian B. raises; increases; short-run C. raises; decreases; short-run D. reduces; increases; long-run E. has zero influence on; decreases; money-neutral inflation, and the Phillips curve demonstrates that theory of price behavior.arrow_forwardHow do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a year thanks sarrow_forwardIf the actual unemployment rate falls below the natural unemployment rate, how does the actual inflation rate change? The actual inflation rate ________. A. doesn't change, but the short-run Phillips curve shifts leftward B. rises up along the short-run Phillips curve C. doesn't change, but the expected inflation rate rises D. rises and the natural unemployment rate fallsarrow_forward
- 32 There is a new central bank president who wants low inflation much more than the previous president did. According to the Augmented Phillips Curve Model, in this situation, which of the following would be the most help in keep unemployment from rising in the sort run? a.People know the central bank president's true desires and believe he will stay in office for a long time b.Peoples' wage wage contracts are long-lasting. c.People know the central bank president's true desires and believe that he will only be in office for a short time. d.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a short time. e.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for aarrow_forwardImage not accepted. Only type writing allow....don't use pepar work then I will give u down thamb ?arrow_forwardDraw a correctly labeled graph showing a short-run Phillips curve with an expected inflation rate of 0% and the corresponding long-run Phillips curve a. b. On your graph, label the nonaccelerating inflation rate of unemployment On your graph, show what happens in the long run if the government decides to decrease the unemployment rate below the nonaccelerating inflation rate of unemployment. Explain. С.arrow_forward
- The Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment rate Thanks!arrow_forwardThe Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment ratearrow_forwardSuppose the long-run Phillips curve shifts to the right. For any given rate of money growth and inflation, how would unemployment and output change? a. Unemployment would be higher, and output would be lower. b. Unemployment would be higher, and output would be higher. c. Unemployment would be lower, and output would be lower. d. Unemployment would be lower, and output would be higher.arrow_forward
- According to the figure below, 8. Rightward AS shifts cause leftward Phillips curve shifts PC, PC, 6. 2. 1. 2 3 4. 8. Unemployment Rate (percent) What inflation rate would occur if the unemployment rate were 7 percent, with Instructions: Round your responses to the nearest O5 percent (eg. 1.0, 15, 2 0) a. PC? b- PC2? Inflation Rate (percent) 3.arrow_forwardThe Phillips curve is given by I-T =0.1-2u The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: A. 1% B. 2% C. 3% D. 4% Answer 04:29 PM 19-10-2021arrow_forwardWhat is true along the long-run Phillips curve? A. A labor shortage exists. B. A tradeoff exists between the inflation rate and the unemployment rate. C. The economy is at full employment. D. The inflation rate equals the expected inflation rate and any unemployment rate is possible.arrow_forward
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