ECON 102 Lecture Notes - Lecture 18: Phillips Curve, Aggregate Supply, Aggregate Demand

29 views3 pages

bronzelouse659

31 Mar 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

jc123 and 40170 others unlocked

ECON 102 Full Course Notes

Verified Note

64 documents

Document Summary

Phillips curve: a curve that shows the short-run tradeof between inlaion and unemployment. Aggregate demand, aggregate supply, and the phillips curve. The model of aggregate demand and aggregate supply provides an easy explanaion for the menu of possible outcomes described by the phillips curve. The phillips curve simply shows the combinaions of inlaion and unemployment that arise in the short run as shits in the aggregate-demand curve move the economy along the short-run aggregate-supply curve. According to milton friedman, there is one thing that monetary policy cannot do and that is to pick a combinaion of inlaion and unemployment on the phillips. Phelps wrote a paper denying the existence of a long-run tradeof between inlaion and unemployment. In other words, they conclude that there is no reason to think the rate of inlaion would, in the long-run, be related to the rate of unemployment. Policy makers therefore face a long-run phillips curve that is verical.

Related Questions

8) What can be concluded from Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve?

A) that there is no long run tradeoff between unemployment and inflation

B) that there is a short run tradeoff between unemployment and inflation

C) that there are two types of Phillips curves

D) all of the above

E) none of the above

9) Given the accelerationist Phillips curve ?? = - 0.3 (U - 6) + ?, suppose that inflation in the preceding period was 3 percent, unemployment is 6 percent, and there is a price shock of 2 percent. The current inflation rate is ________.

A) 3 percent

B) 0.2 percent

C) 5 percent

D) 1 percent

E) none of the above

10) Which of the following shows a negative relationship between the output and unemployment gaps?

A) the AS curve

B) the Phillips curve

C) Okun's law

D) the classical dichotomy

E) none of the above

1) According to the Phillips curve :

a. there is a direct relationship between unemployment and inflation

b. there is an inverse relationship between unemployment and inflation

c. there is a direct relationship between income and unemployment

d. there is an inverse relationship between income and unemployment

e. there is a direct relationship between the money supply and inflation

2) which of the following believe that there is a Phillips curve trade-off in both the short run and the long run?

a. monetarists

b. rational expectations school

c. Keynesians

d. classical economist

e. methodists

3) Which of the following believe that there is a Phillips curve trade-off in the short run but not in the long run

a. Keynesians

b. rational expectations school

c. monetarists

d. Lithuanians

e. supply-siders

4) According to the Monetarists, the principal cause for the Phillips curve shifting to the right from the 1950s to the early 1980s was:

a. decreasing labor productivity

b. an increase in the inflationary expectation of labor

c. increase in the price of oil

d. increase in unemployment benefit

e. all of the above

5) According to the Keynesians, the reason why the Phillips curve shifted to the right from the 1950s to the early 1980s was :

a. an increase in the inflationary expectation of labor

b. "supply shocks" in the form of oil price increase

c. the changing composition of the labor force

d. all of the above

e. none of the above

skymuskrat620

1) In 1958, A.W. Phillips stated that inflation and unemployment are correlated. In 1972, Milton Friedman stated that Phillips' relationship was only temporary, and thus only applicable in the short-run. Friedman contended that people will over time anticipate the correct value of inflation and in the meantime adjust their actions accordingly. These expectations mitigate policymakers' attempts to control unemployment through inflationary policies. Thus, Friedman believed that in the long-run, there is no relationship between inflation and unemployment. Friedman's analysis of inflation and unemployment is summarized by the following equation: equation, where a is a positive constant, and the natural rate of unemployment is the normal unemployment that an economy experiences because people are continually quitting and searching for jobs.

Which of the answer choices is Phillips' theory regarding inflation and unemployment?

A. More people working in an economy correlates to more expensive goods and services.

B. Fewer people looking for work in an economy correlates to cheaper goods and services.

C. More people looking for work in an economy correlates to more expensive goods and services.

D. Fewer people working in an economy correlates to more expensive goods and services.

2) At the end of 2014, the unemployment rate in the U.S. was 5%. The Federal Reserve has stated that it will conduct monetary policy to bring down this unemployment rate during 2015. Suppose that the natural rate of unemployment is 6%, the value of a is one, and the public expects inflation of 4%. According to the given information, which of the answer choices correctly gives values of actual inflation that would support Phillips's theory and Friedman's theory, respectively?

A. Phillips: 6%; Friedman: 5%

B. Phillips: 7%; Friedman: 6%

C. Phillips: 5%; Friedman: 2%

D. Phillips: 3%; Friedman: 4%

greenrhinoceros438

ECON 102 Lecture Notes - Lecture 18: Phillips Curve, Aggregate Supply, Aggregate Demand

ECON 102 Full Course Notes

Document Summary

Get access

Related Documents

ECON 102 Lecture Notes - Lecture 39: Phillips Curve, Inverse Relation, Disinflation

ECON 102 Lecture Notes - Lecture 13: Macroeconomics, Nominal Rigidity, Potential Output

ECON 102 Lecture Notes - Lecture 6: Unemployment Benefits, Output Gap, Phillips Curve

Related Questions