If the rate of inflation in the economy is steady at 5 percent per year, how does the short-run Phillips curve predict that the unemployment rate will be changing, if at all? Does your answer change if inflation in the economy is 0 percent?
Illustrate your answer with a Phillips curve.
If the rate of inflation is constant at 5 percent per year, then the price level is rising, but the unemployment rate should remain constant, as shown in the graph below (as long as inflation is at 5 percent, the unemployment rate does not change). If inflation is 0 percent, then the Phillips curve would predict that unemployment will be higher than it was when inflation was 5 percent (assuming no change in inflation expectations), but as long as inflation is constant at 5 percent, there will be no change in the unemployment rate.
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An aggregate demand curve
A) shifts to the right when the price level increases and to the left when the price level falls. B) shifts to the right when population decreases and shifts to the left when population increases. C) does not shift, unlike individual or market demand curves. D) shifts to the right when any non-price-level factor increases total planned real spending.
Demand for a particular type of apple is always strong in the beginning of fall. As a result, grocery stores typically face a _____ of these apples, causing them to _____ their price for the good
a. shortage; raise b. surplus; raise c. shortage; reduce d. surplus; reduce
To obtain a discount loan from the Fed, a commercial bank must:
A. provide collateral. B. agree to more frequent examinations. C. prove that the loan will be used to make loans. D. prove that it will fail if it does not obtain the loan.
Suppose that the money supply increases. In the short run this decreases unemployment according to
a. both the short-run Phillips curve and the aggregate demand and aggregate supply model. b. neither the short-run Phillips curve nor the aggregate demand and aggregate supply model. c. the short-run Phillips curve, but not according to the aggregate demand and supply model. d. the aggregate demand and aggregate supply model, but not according to the short-run Phillips curve.