The Ad-Ai Analysis in Conjunction with the Phillips Curve Relationship
The AD-AI analysis in conjunction with the Phillips curve relationship shows that
A) it is impossible to trade higher inflation for lower unemployment in the short run.
B) there is no long-run gain from expansionary monetary policy.
C) inflation and unemployment are positively correlated in the long run.
D) it is possible to trade lower inflation for higher unemployment in the long run.
E) there is no short-run gain from expansionary monetary policy.
There is no long-run tradeoff between inflation and unemployment because
A) the aggregate demand curve always shifts back to its baseline position.
B) inflation always returns to the baseline level.
C) unemployment always returns to the natural rate.
D) the Federal Reserve does not allow such a tradeoff.
E) potential GDP declines as the rate of inflation increases.
The fact that the average unemployment rate during the 1950s and early 1960s was roughly the same as the average unemployment rate during the late 1960s and 1970s, which was roughly the same as the average unemployment rate during the 1980s and 1990s, shows that
A) there is not even a short-run tradeoff between unemployment and inflation.
B) it is also possible for there to be a long-run tradeoff between inflation and unemployment.
C) there are many issues that the AD-IA analysis cannot address.
D) it is possible to have high inflation monetary policy without long-run pain.
E) there is no long-run tradeoff between inflation and unemployment.
The hypothesis of political business cycles asserts that
A) politicians can produce a favorable short-run tradeoff between inflation and unemployment to improve their chances of reelection.
B) economic expansions and contractions are functions of congressional support for the president's economic policy.
C) political popularity is not a function of the business cycle.
D) an economic recession takes place before every national election.
E) political manipulation of the business cycle is an effective way to increase permanent economic growth.