Due to historical differences, countries often differ in how quickly a change in

Question

Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate. Use this information to answer questions 17 to 22.
17. What is the slope of Japan’s short-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope
d.Flat upward slope
e.Vertical
f.Horizontal

18. What is the slope of Zimbabwe’s short-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope
d.Flat upward slope
e.Vertical
f.Horizontal


19. In the short run, in which country will expansionary monetary policy be more effective at reducing unemployment?
a.Japan
b.Zimbabwe
c.The same for both

20.what is the slope of Japan’s long-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope
d.Flat upward slope
e.Vertical
f.Horizontal

21.what is the slope of Zimbabwe’s long-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope
d.Flat upward slope
e.Vertical
f.Horizontal

22. In the long run, in which country will expansionary monetary policy be more effective at reducing unemployment?
a. Japan
b. Zimbabwe
c. The same for both

Explanation / Answer

Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate.

In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate. Use this information to answer questions 17 to 22.

17. What is the slope of Japan’s short-run Phillips curve?
a.Steep downward slope
b.Flat downward slope because "it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate."
c.Steep upward slope
d.Flat upward slope
e.Vertical
f.Horizontal

18. What is the slope of Zimbabwe’s short-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope because "a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate"
d.Flat upward slope
e.Vertical
f.Horizontal


19. In the short run, in which country will expansionary monetary policy be more effective at reducing unemployment?
a.Japan
b.Zimbabwe - steeper = quicker effect
c.The same for both

20.what is the slope of Japan’s long-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope
d.Flat upward slope
e.Vertical - all long-run Phillips Curves are vertical
f.Horizontal

21.what is the slope of Zimbabwe’s long-run Phillips curve?
a.Steep downward slope
b.Flat downward slope
c.Steep upward slope
d.Flat upward slope
e.Vertical
f.Horizontal

22. In the long run, in which country will expansionary monetary policy be more effective at reducing unemployment?
a. Japan
b. Zimbabwe
c. The same for both - the same curves indicate the same results

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