Suppose we observe several years of falling inflation rates for an economy. Which of the following would best explain this phenomenon?
a. Unemployment is probably at the natural rate.
b. The unemployment rate must be rising.
c. The unemployment rate must be below the natural rate.
d. The unemployment rate is probably above the natural rate.
e. Aggregate output must be increasing.
QUESTION 2Which of the following would correspond to a movement downward along a short-run Phillips curve?
a. The aggregate demand curve shifts rightward, moving up along a short-run aggregate supply curve.
b. The aggregate demand curve shifts leftward, moving down along a short-run aggregate supply curve.
c. The short-run aggregate supply curve shifts leftward, moving up along the aggregate demand curve.
d. The money supply curve shifts rightward for a given money demand curve.
e. Both the money demand and the money supply curves shift leftward.
QUESTION 3The short-run Phillips curve portrays a(n):
a. direct relationship between total employment and the inflation rate.
b. inverse relationship between inflation and total employment.
c. direct relationship between the unemployment rate and the inflation rate.
d. inverse relationship between the unemployment rate and the inflation rate.
e. inverse relationship between the price level and the unemployment rate.
QUESTION 4An increase in the expected inflation rate will:
a. shift the short-run Phillips curve upward and to the right.
b. shift the short-run Phillips curve downward and to the left.
c. not shift the short-run Phillips curve unless the unemployment rate changes.
d. cause the unemployment rate associated with each inflation rate to decrease.
e. tend to increase production unless the actual inflation rate also increases.
QUESTION 5The short-run Phillips curve shows that:
a. the economy can have low inflation and low unemployment simultaneously.
b. the economy can have high per-capita income and high interest rate simultaneously.
c. a reduction in per-capita income comes at the expense of lower inflation.
d. a reduction in unemployment comes at the expense of higher inflation.
e. a reduction in inflation comes at the expense of lower exchange rate.
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