1) If an economy\'s short-run Philips curve shifts up, this is most likely due t

Question

1) If an economy's short-run Philips curve shifts up, this is most likely due to;
a. change in the inflation rate.
b. an increase in the unemployment rate.
c. an increase in expected inflation.
d. a contractionary fiscal policy.

2) The long-run philips curve;
a. suggests that policies have little impact on the natural rate of unemployment in the long run.
b. explains how expansionary policies can affect an economy, while contractionary policies have little impact.
c. shows the positive relationship that exists between the unemployment rate and th inflation rate.

3. Workers in country A have cost-of-living adjustments in their wage contracts, and workers in country B do NOT. When the central banks of countries A and B increase the money supply:
a. prices in country A increase faster than prices in country B.
b. prices in country B increase faster than prices in country A.
c. prices in countries A and B will change at the same rate.
D. COLAS have no affect on the speed of price changes.


Thank you.

Explanation / Answer

c. an increase in expected inflation. a. suggests that policies have little impact on the natural rate of unemployment in the long run. (natural rate) a. prices in country A increase faster than prices in country B. (COLA makes wages go up since we have inflation. Wages up = prices up).

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