Explain why the Phillips Curve is drawn to show a positive relationship between aggregate output and inflation, and why a move up the curve to an above equilibrium output level may be followed by an upward shift of the whole curve
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- The Phillips curve represents the relationship between unemployment and inflation. You are required to think about the impact on the economy of movements along the curve. If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.Does the Phillips curve have a positive or negative slope? Explain how this slope is derived. When will an increase in aggregate demand not result in lower unemployment rates in the short run?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 rate
- Which of the following is true about the Phillips curve? The empirical relationship between unemployment and inflation in the US disappeared after the 1970s. This means that the theoretical Phillips curve does not represent the world well. For a researcher to identify the theoretical Phillips curve from empirical data, the economy must be subject to supply shocks. The empirical Phillips curve implies that a government must choose between either low unemployment and high inflation or high unemployment and low inflation. When inflation expectations adjust, the negative empirical correlation between inflation and unemployment might disappear.You have been told that expected inflation is greater than actual inflation in an economy. Show this on the Phillips curve and explain how the economy reverts to long run equilibriumDraw a Phillips curve graph here that shows a natural rate of unemployment of 4% and a current inflation rate of 2%. Make sure your lines and axes are labeled and your graph is complete! Use your knowledge of The Phillips Curve to answer the following questions. The threat of future inflation: makes people reluctant to loan money for long periods. makes people eager to loan money for long periods. has no effect on loaning money. increases the value of money paid back in the future. makes people reluctant to borrow money for long periods. According to the short-run Phillips Curve, there is a trade-off between: interest rates and inflation. the growth of the money supply and interest rates. unemployment and economic growth. inflation and unemployment. economic growth and interest rates. Which of the following is true of the long-run Phillips curve? it shows there is a trade-off between unemployment and inflation. it is positively sloped when the inflation rate exceeds…
- Draw the Phillips curve.Use the model of aggregate demand and aggregate supply to show how policy can move the economy from a point on this curve with high inflation to a point with low inflationAccording 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.Explain how the expected inflation rate affects the short-run Phillips curve. Be sure to mention the role played by the money wage rate.
- If inflationary expectations increase, the Phillips curve will A) become upward sloping B) shift to the right C) become vertical D) shift to the leftDescribe the concept of an accelerationist Phillips Curve and how it manifests as an empirical relationship in macroeconomic data (if you want to show data, you may choose any country). Evaluate the role and significance of inflation expectations for an accelerationist Phillips Curve.How does the short-run Phillips curve reflect an increase in the price of oil such as occurred in the early 1970s? as a leftward shift in the short-run Phillips curve as a rightward shift in the short-run Phillips curve as a downward movement along the short-run Phillips curve as an upward movement along the short-run Phillips curve
