What is the Phillips curve? Explain the difference in movements along the Phillips curve and shifts in the Phillips curve, and explain what can cause these movements and shifts
What will be an ideal response?
The Phillips curve is a graph which shows the relationship between the unemployment rate and the inflation rate. Movements along the Phillips curve can be caused by demand shocks, where positive demand shocks cause the inflation rate to increase and the unemployment rate to decrease, and negative demand shocks cause the inflation rate to decrease and the unemployment rate to increase. Shifts in the Phillips curve are caused by changes in the expected inflation rate and by supply shocks. Negative supply shocks and increases in the expected inflation rate cause the Phillips curve to shift up, and positive supply shocks and decreases in the expected inflation rate cause the Phillips curve to shift down.
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Refer to the table above. When the price is ________ and the quantity is ________, social surplus is maximized
A) $8; 5 units B) $6; 4 units C) $4; 4 units D) $2; 8 units
Suppose the government mandates the installation of a certain type of pollution abatement equipment for the leather tannery industry
For some firms in the industry, installing this equipment may not be the most cost effective method of reducing pollution. Indicate whether the statement is true or false
If the median voter voted against a project, we can infer that
A) at least half of the voters also voted against it. B) at most a third of the voters voted against the project. C) the project was approved. D) at least half of the voters voted in favor of the project.
At the natural rate of unemployment, the long-run Phillips curve has a(n)
a. vertical slope. b. horizontal slope. c. upward slope. d. downward slope.