Macroeconomics
4th Edition
ISBN: 9780393602487
Author: Jones, Charles I.
Publisher: W. W. Norton & Company
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Chapter 12, Problem 5RQ
To determine
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True or false?
An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.
How the Phillips Curve model (and associated diagram) could be modified to take account of shifts in the relationship over time?
When you graph the Phillips curve, what goes on the y-axis?
Change in inflation
Rate of inflation
Change in consumer price
Change in short-run output
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- The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well. How does economic theory explain this apparent violation of the Phillips curve model?arrow_forwardWatch the 2012 OpenLearn from The Open University video The Phillips Curve - 60 second adventures in economics and answer the following questions based on the video and your reading of the textbook: What is the Phillips Curve? Explain. Suppose the unemployment rate in Canada is very high. If the relationship depicted by the Phillips Curve is true, what could the hands-on approach to economic policy do to reduce unemployment? How would such a policy affect inflation? Explain why both unemployment and inflation rose in the 1970s. 2. Consider the following scenarios and briefly explain how each scenario would affect short-run aggregate supply (SAS), long-run aggregate supply (LAS) or aggregate demand (AD) in Canada. In some situations, more than one may be affected. Canada produces larger number of university graduates who possess higher levels of education and skill. Depletion of resources cause increase in the prices of key inputs in production. Canada’s trading…arrow_forwardPrior to the mid-1970s, many economists thought a higher rate of unemployment would reduce the inflation rate. Why? How does the modern view of the Phillips curve differ from the earlier view?arrow_forward
- If workers accurately predict the rate of inflation, is there a short-run trade-off between inflation and unemployment, as predicted by the Phillips curve? Why or why not?arrow_forwardDo you think the Phillips curve is a useful tool for analyzing the economy today? Why or why not?arrow_forwardTrue or false? Phillips curve represents a structural relationship between unemployment and inflation that never changes.arrow_forward
- How does the short-run Phillips curve reflect an increase in the price of oil such as occurred in the early 1970s? as a leftward shift in the short-run Phillips curve as a rightward shift in the short-run Phillips curve as a downward movement along the short-run Phillips curve as an upward movement along the short-run Phillips curvearrow_forwardInflationary expectations are an important driver of the Phillips curve relationship. What are three different ways inflationary expectations might be modelled? Depict each graphically.arrow_forwardDo you think the Phillips curve is a useful tool for analyzing the economy today? Why or why not? Please cite references to support your point of view.arrow_forward
- Using what you know about the Phillips curve, determine whether the following quantities will increase, decrease, or remain the same. a. Unemployment in the short run after an increase in inflation: (Click to select) v b. Unemployment in the long run after an increase in inflation: (Click to select) v c. Inflation in the short run after a decrease in unemployment: (Click to select) d. Inflation in the long run after a decrease in unemployment: (Click to select) |(Click to select) decrease increase remain the samearrow_forwardHow can you show an output gap on the vertical phillips curve model?(can use the full inflation targeting model if that helps)arrow_forwardChanging the slope of the Phillips curve: Suppose the slope of the Phillips curve the parameter -increases. How would the results differ from the Volcker disinflation example considered in the chapter? What kind of changes in the economy might influence the slope of the Phillips curve?arrow_forward
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