Question 3 Suppose inflation over the next year is expected to be 5%, and assume there are no supply shocks. What rate of inflation will the short-run Phillips curve show at the natural rate of unemployment? 8) 0% b) Between 0% and 5% c) 5% d) Over 5% Question 4 Which of the following explains why the long-run Phillips curve is drawn as a vertical line? a) Because in the long run, government policies will ensure that unemployment is at its natural rate. b) Because in the long run, the labour market will settle so that unemployment is at its natural rate c) Because of the quantity theory of money. d) Because its true shape is unknown. Question 5 Which of the following might shift the short-run Phillips curve to the left? a) A rise in the expected rate of inflation. b) A natural disaster which temporarily disrupts production. c) A rise in the benefits paid to unemployed people d) An increase in the labour force