Question

In: Economics

To move to a point on the Phillips curve where inflation is lower, unemployment must rise...

To move to a point on the Phillips curve where inflation is lower, unemployment must rise and the unemployment rise could have been caused by the Fed decreasing the money supply.

Select one:

True

False

According to the natural rate hypothesis (Friedman and Phelps), policymakers face a long-run Philips curve that is vertical because the natural unemployment rate is independent of the inflation rate.

Select one:

True

False

The federal government could increase spending and decrease taxes to move to a point on the short-run Phillips curve where inflation is lower, but unemployment would rise.

Select one:

True

False

The short-run Phillips curve shows the combinations of unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.

Select one:

True

False

In the mid and late 1990s, aggregate supply shifted to the right and the Phillips curve shifted to the left as inflation expectations changed to a lower rate.

Select one:

True

False

Solutions

Expert Solution

To move to a point on the Phillips curve where inflation is lower, unemployment must rise and the unemployment rise could have been caused by the Fed decreasing the money supply.

True

Explanation: There is an inverse relationship between inflation and unemployment.

According to the natural rate hypothesis (Friedman and Phelps), policymakers face a long-run Philips curve that is vertical because the natural unemployment rate is independent of the inflation rate.

True

Explanaiton: In the longr run, unemployment is not dependant on nominal variables.

The federal government could increase spending and decrease taxes to move to a point on the short-run Phillips curve where inflation is lower, but unemployment would rise.

False
Explanation: Expansionary fiscal policy would increase inflation and lower unemployment

The short-run Phillips curve shows the combinations of unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.

False

Explanation: In the short run, the AS is assumed to be fixed.

Rahul Sunny answered 2 weeks ago

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