According to the Phillips curve model, if the actual inflation rate exceeds the expected inflation rate, which of the following statements is true? There is no frictional unemployment. There is no structural unemployment. The equilibrium real output is greater than the potential real output. The economy is operating in its long - run equilibrium. There is a recessionary gap in the economy's output.

According to the Phillips curve model, if the actual inflation rate exceeds the expected inflation rate, which of the following statements is true? There is no frictional unemployment. There is no structural unemployment. The equilibrium real output is greater than the potential real output. The economy is operating in its long - run equilibrium. There is a recessionary gap in the economy's output.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter17: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 7SQ

See similar textbooks

Similar questions

Consider the Efficiency Wage story. Suppose we had several periods of 0 inflation. Let ST represent the total supply of labor; SNS the supply of non-shirking (not lazy) workers, and SShrk the number of shirking (lazy) workers. Suppose we had several periods of 0% inflation. Then if we had an increase in Aggregate Demand that caused an increase in the Aggregate Price level, we would see which of the following in the short run? Group of answer choices a) higher inflation and lower unemployment. b) None of the other options. c) lower inflation (which would be deflation given our premise) and higher unemployment. d) higher inflation and higher unemployment. e) lower inflation (which would be deflation given our premise) and lower unemployment.
a) Are the effects of an increase in aggregate demand in the AD-AS model consistent with the Phillips curve? Explain. b. Discuss the factors determining the slope of the short-run Phillips curve. Is the linear shape appropriate? Why or why not?
The following graphs show the state of an economy that is currently in Tong-run equilibrium. The first graph shows the aggregate demănd (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phìllips curves (LRPC and SRPC). LRAS AD LRAS AD 12 15 18 OUTPUT (Trillions af dollars) LRPC SRPC LRPC SRPC 10 12 UNEMPLOYMENT RATE (Percent) Which of the following statements are true based on these graphs? Check all that apply. - The current quantity of output is greater than potential output. The natural level of output is $9 trillion. - The unemployment rate is currently 6% higher than the natural rate of unemployment. Suppose the central bank of the economy increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the The long-run effect of the central bank's policy is inflation rate, real GDP. in the unemployment rate, and in INFLATION RATE
(a) What events of the 1970s and 1980s made economists believe that the shortrun relationship between inflation and unemployment was unstable (not fixed and permanent)? (b) Explain, using a diagram(s) and the concept of stagflation, the relationship between shifts in the SRAS curve and the position of the short-run Phillips curve.
The text proposes the following model of expected inflation x = (1 - 0) x + 0,-1 What do we know about your process of the formation of expected inflation when 0 = 07 OA. Neither last year's inflation rate nor the long-run average inflation rate impact your view on this year's expected rate. OB. Last year's inflation rate will influence you to revise your estimates for this year's expected rate. OC. Regardless of what inflation was last year, you would expect it to be at the long-run average inflation rate this year. OD. Last year's inflation rate and the long-run average inflation rate have an equal impact on your view of this year's expected rate. What do we know about your process of the formation of expected inflation when 0-17 OA. Neither last year's inflation rate nor the long-run average inflation rate impact your view on this year's expected rate OB. Last year's inflation rate will be the only input for you to revise your estimates for this year's expected rate regardless of…
The table below reports the actual inflation rate from 2016 to 2020. Complete the table, assuming people form expectations adaptively. Give all answers to two decimals. Year 2016 2017 2018 2019 2020 Actual inflation rate 3% 4.50% 7.00% 6.00% 4.00% Expected inflation rate a) d) e) 3% 4.50% % % % b) c) f) Error 0% 1.00% % % %
. Assume that the economy experiences no change in productivity, money demand or its natural rate of unemployment in either the short or long run. The inflation rate responds immediately to correspond to the money supply growth rate. However, wage inflation adjusts to changes in the inflation rate with a time lag. Draw a diagram with inflation on the vertical axis and the unemployment rate on the horizontal axis that illustrates the Phillips curve relationship in the short run. Label the curve as PC1. Mark a point N on the horizontal axis that represents the natural rate of unemployment
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. INFLATION RATE (Percent) 20 18 16 14 12 2 10 8 0 1 2 LRPC Y-Intercept: None 5 A 6 3 4 7 UNEMPLOYMENT RATE (Percent) B 9 SRPC 10 ?
The long-run Phillips Curve describes: The relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience. O An increase in expected inflation will cause nominal wages to rise, shifting both SRAS and the Phillips Curve up. That there is a predictable negative relationship between the output gap and the unemployment rate but it is not one to one. The negative short-run relationship between the unemployment rate and the inflation rate.
Expectations of inflation are ____________ effective than/as actual inflation in ____________ production costs. a) less; increasing b) less; decreasing c) as; increasing d) as; decreasing e) more; increasing
Explain why the Phillips Curve is drawn to show a positive relationship betweenaggregate output and inflation, and why a move up the curve to an aboveequilibrium output level may be followed by an upward shift of the whole curve
Assume that inflation falls significantly below expectations. Diagram both the short-run and long-run effects on employment using a Phillips Curve diagram. What changes in this model to allow the return to longrun equilibrium?