[Solved] An Increase in the Expected Inflation Rate Will

Figure 13.2 Alt text for Figure 13.2: In figure 13.2, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.2: The x-axis is labelled, unemployment rate (percent).The y-axis is labelled, inflation rate (percent per year).3 points; A (5, 3), B (3.8%, 5.5%), C (6, 1)are plotted on the graph.The points are connected to their respective coordinates on the x and y-axes with dotted lines.A straight line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the bottom center, and passes through points A, B, and C.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, begins from the x-axis value 5,and intersects the Short-run Philips Curve at point A. -Refer to Figure 13.2.Suppose the economy is at point C.If the Bank of Canada decreases the money supply so that inflation falls, the economy will ________ in the long run, holding all else constant. A)eventually move to point A B)eventually move to point B C)stay at point C D)move to point A and then back to point B

Figure 13.2 Alt text for Figure 13.2: In figure 13.2, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.2: The x-axis is labelled, unemployment rate (percent).The y-axis is labelled, inflation rate (percent per year).3 points; A (5, 3), B (3.8%, 5.5%), C (6, 1)are plotted on the graph.The points are connected to their respective coordinates on the x and y-axes with dotted lines.A straight line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the bottom center, and passes through points A, B, and C.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, begins from the x-axis value 5,and intersects the Short-run Philips Curve at point A. -Refer to Figure 13.2.Suppose the economy is at point A.The Bank of Canada uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur? A)Inflation will accelerate in the long run. B)Inflationary expectations will decline. C)Unemployment will rise above the natural rate. D)Unemployment will accelerate in the long run. E)Inflation will be permanently lower in the long run.

Figure 13.2 Alt text for Figure 13.2: In figure 13.2, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.2: The x-axis is labelled, unemployment rate (percent).The y-axis is labelled, inflation rate (percent per year).3 points; A (5, 3), B (3.8%, 5.5%), C (6, 1)are plotted on the graph.The points are connected to their respective coordinates on the x and y-axes with dotted lines.A straight line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the bottom center, and passes through points A, B, and C.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, begins from the x-axis value 5,and intersects the Short-run Philips Curve at point A. -Refer to Figure 13.2.At which point is the unemployment rate equal to the natural rate of unemployment? A)A B)B C)C D)There is insufficient information on the graph to answer this question.

Figure 13.2 Alt text for Figure 13.2: In figure 13.2, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.2: The x-axis is labelled, unemployment rate (percent).The y-axis is labelled, inflation rate (percent per year).3 points; A (5, 3), B (3.8%, 5.5%), C (6, 1)are plotted on the graph.The points are connected to their respective coordinates on the x and y-axes with dotted lines.A straight line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the bottom center, and passes through points A, B, and C.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, begins from the x-axis value 5,and intersects the Short-run Philips Curve at point A. -Refer to Figure 13.2.At which point are inflation expectations equal to the actual inflation rate? A)A B)B C)C D)all of the above

Figure 13.2 Alt text for Figure 13.2: In figure 13.2, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.2: The x-axis is labelled, unemployment rate (percent).The y-axis is labelled, inflation rate (percent per year).3 points; A (5, 3), B (3.8%, 5.5%), C (6, 1)are plotted on the graph.The points are connected to their respective coordinates on the x and y-axes with dotted lines.A straight line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the bottom center, and passes through points A, B, and C.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, begins from the x-axis value 5,and intersects the Short-run Philips Curve at point A. -Refer to Figure 13.2.The nonaccelerating inflation rate of unemployment, or NAIRU, is associated with which point rate in the figure above? A)A B)B C)C D)all of the above

If workers and firms raise their inflation expectations, A)unemployment will fall. B)actual inflation will fall to match expected inflation. C)the short-run Phillips curve will be vertical. D)the short-run Phillips curve will shift upward. E)the short-run Phillips curve will become flatter.

Where does the short-run Phillips curve intersect the long-run Phillips curve? A)at the point where the rate of inflation and the unemployment rate are equal B)at the natural rate of inflation C)at the point where actual inflation is equal to expected inflation D)at the short-run equilibrium inflation rate E)There is no intersection between the short-run and long-run Phillips curves.

If expected inflation rises, the long-run Phillips curve will A)shift to the right. B)not be affected. C)shift to the left. D)become negatively sloped. E)become steeper.

A decrease in expected inflation will A)reduce real wages. B)increase the natural rate of unemployment. C)shift the long-run Phillips curve to the left. D)shift the short-run Phillips curve to the left. E)increase nominal wages.

Which of the following would increase the natural rate of unemployment? A)an increase in the number of younger, less skilled workers in the economy B)a reduction in the generosity of unemployment insurance programs C)restrictions on the ability of unions to negotiate wage changes with companies D)an increase in government-sponsored programs that train unemployed workers so they can find new jobs quickly E)an increase in the number firms going out of business due to a recession