Q1. Geno Potosi is delivering a lecture on the Phillips curve model, during which he makes the following two statements:

Statement 1: If expected inflation is less than actual inflation, the short-run Phillips curve shows that the unemployment rate will increase.

Statement 2: The negative relationship between the inflation rate and unemployment rate does not hold in the long run because the expected inflation rate adjusts to the actual performance of inflation.

Are Potosi’s two statements CORRECT?

          Statement 1                         Statement 2

A) Correct                                       Incorrect

B) Incorrect                                     Correct

C) Correct                                       Correct

Q2. The Phillips curve shows the trade-off between:

A)    inflation and unemployment.

B)    the rate of change in the money supply and the rate of change in employment.

C)    aggregate demand and the real wage rate.

Q3. What would be the impact of an unanticipated increase in aggregate demand on an economy’s rate of unemployment, rate of inflation, and the short-run Phillips curve (SRPC)?

     Unemployment      Inflation                                                               SRPC

A) Decrease                            Decrease                                   Downward shift of curve

B) Increase                              Increase                                     Downward movement along curve

C) Decrease                            Increase                                     Upward movement along curve

Q4. A shift in the long-run Phillips curve represents a change in the:

A)    expected inflation rate.

B)    sensitivity of unemployment to changes in inflation.

C)    natural rate of unemployment.

答案和详解如下：

Q1. Geno Potosi is delivering a lecture on the Phillips curve model, during which he makes the following two statements:

Statement 1: If expected inflation is less than actual inflation, the short-run Phillips curve shows that the unemployment rate will increase.

Statement 2: The negative relationship between the inflation rate and unemployment rate does not hold in the long run because the expected inflation rate adjusts to the actual performance of inflation.

Are Potosi’s two statements CORRECT?

          Statement 1                         Statement 2

A) Correct                                       Incorrect

B) Incorrect                                     Correct

C) Correct                                       Correct

Correct answer is B)

Statement 1 is incorrect. If actual inflation is greater than expected inflation, such as would occur in the case of a greater-than-expected increase in aggregate demand, the unemployment rate decreases in the short run. Statement 2 is correct. The short-run difference between expected and actual inflation is the source of the short-run negative relationship between inflation and unemployment.

Q2. The Phillips curve shows the trade-off between:

A)    inflation and unemployment.

B)    the rate of change in the money supply and the rate of change in employment.

C)    aggregate demand and the real wage rate.

Correct answer is A)

The theory of the Phillips curve is that there is an inverse relationship between the inflation rate and the unemployment rate.

Q3. What would be the impact of an unanticipated increase in aggregate demand on an economy’s rate of unemployment, rate of inflation, and the short-run Phillips curve (SRPC)?

     Unemployment      Inflation                                                               SRPC

A) Decrease                            Decrease                                   Downward shift of curve

B) Increase                              Increase                                     Downward movement along curve

C) Decrease                            Increase                                     Upward movement along curve

Correct answer is C)

Assume that the expected inflation rate is 8 percent a year and that the natural rate of unemployment is 5 percent for an economy. An unanticipated increase in aggregate demand will cause firms to hire more workers in the short-run. That action should reduce the economy’s unemployment rate below its natural rate. However, as aggregate demand increases the inflation rate will increase. This joint action would result in an upward movement along the short-run Phillips curve.

Q4. A shift in the long-run Phillips curve represents a change in the:

A)    expected inflation rate.

B)    sensitivity of unemployment to changes in inflation.

C)    natural rate of unemployment.

Correct answer is C)

The long-run Phillips curve represents the natural rate of unemployment. Changes in the natural rate can occur due to long-run changes in the state of technology and the size, makeup, and mobility of the labor force.

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