Multiple Choice Questions:
1. Most economists today believe that the Phillips curve is
a. Downward sloping in the short run but vertical in the long run.
b. Vertical in the short run but downward sloping in the long run.
c. Upward sloping in the short run but vertical in the long run.
d. Vertical in the short run but upward sloping in the long run.
2. The short-run Phillips curve trade-off implies
a. That if the curve shifts over time, society must accept decreases in unemployment for decreases in inflation.
b. That if the curve is stable, society must accept increases in inflation for increases in unemployment.
c. That if the curve shifts over time, society must accept increases in inflation for decreases in unemployment.
d. That if the curve is stable, society must accept increases in unemployment for decreases in inflation.
3. Which of the following would shift the Phillips curve to the left?
a. An adverse supply shock
b. An increase in inflationary expectations
c. A favorable supply shock
d. All of the above
4. If the inflation rate is increasing while unemployment is increasing,
a. The short-run Phillips curve must have shifted right.
b. The short-run Phillips curve must have shifted left.
c. It involved a movement along the short-run Phillips curve.
d. It would be inconsistent with any possible Phillips curve scenario.
5. Which of the following is true?
a. Inflation and unemployment rates can both increase in the short run in response to adverse supply shocks.
b. Inflation and unemployment rates can both decrease in the short run in response to reduced aggregate demand.
c. Inflation and unemployment rates can both decrease in the short run in response to adverse supply shocks.
d. The short-run Phillips curve relationship appears to be relatively stable over time.
e. None of the above is true.
6. The short-run Phillips curve could shift to the right as a result of either ____________ or ____________.
a. Rising oil prices; increasing inflation expectations
b. Rising wages; falling prices
c. Declining oil prices; falling inflation expectations
d. Falling wages; rising prices
e. None of the above
7. If people expect a higher inflation rate, the
a. Short-run Phillips curve will shift to the right.
b. Long-run Phillips curve will shift to the right.
c. Short-run and long-run Phillips curves will both shift to the right.
d. Short-run Phillips curve will shift to the left.
8. A current short-run Phillips curve can remain stable over time
a. Only if there is no inflation.
b. If inflation remains steady at its current rate.
c. If inflation is accelerating.
d. If inflation is decelerating.