[Solved] The Short-Run Phillips Curve Shifting Down Following the 1989 Bank

Figure 13.11 Alt text for Figure 13.11: In figure 13.11, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.11: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, short-run Philips Curve 1, begins at the top left corner and slopes down to the bottom center.A straight line labelled, short-run Philips Curve 2, follows the same slope as Curve 1, but is plotted to the right.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, and intersects the short-run Philips Curve 1 at point A near the bottom end of both lines.Point B is plotted half way along the short-run Philips Curve 1.Long-run Philips Curve intersects short-run Philips Curve 2 at point C near the top half of the curves.Point D is plotted more than half way along the short-run Philips Curve 2.Points E and F are plotted close to the left and right ends, respectively, of the short-run Philips Curve 2. -Refer to Figure 13.11.A follower of the new classical macroeconomics would argue that ________, like that pursued by the Bank of Canada in 1979, would result in a movement from C to A. A)expansionary monetary policy B)contractionary monetary policy C)expansionary fiscal policy D)contractionary fiscal policy E)strict inflation targeting

Deflation refers to A)a decrease in the rate of inflation. B)a falling price level. C)falling oil prices. D)Both A and B are correct. E)None of the above is correct.

Disinflation refers to A)a decrease in the price level. B)a rapid increase in the price level. C)a reduction in the rate of inflation. D)an increase in the rate of inflation. E)a one time drop in the rate of inflation.

Expansionary monetary policy will result in A)lower interest rates. B)decreased rates of inflation. C)a decrease in aggregate demand. D)a loss of central bank credibility. E)all of the above.

If the Bank of Canada chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation, which of the following would you expect to see? A)an upward shift of the short-run Phillips curve B)a downward shift of the short-run Phillips curve C)a decrease in the long-run aggregate supply curve D)the short-run Phillips curve will become flatter E)Both B and C are correct answers.

If the Bank of Canada's announcements about upcoming monetary policy decisions are credible, which of the following would you expect to see? A)Inflation expectations will not accurately reflect actual inflation. B)Expansionary monetary policy will result in lower rates of inflation. C)Firms and workers will be better able to accurately forecast changes in the rate of inflation. D)The Bank of Canada will have less control over the inflation rate. E)The Bank of Canada will be able to dictate the rate of economic growth.

If the Bank of Canada announces that its target for the overnight interest rate is falling from 3 percent to 2.25 percent, how would you expect workers and firms to react? A)As long as the Bank of Canada's announcement is credible, workers and firms will decrease their consumption and investment spending, which will decrease aggregate demand and inflation. B)As long as the Bank of Canada's announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation. C)If the Bank of Canada's announcement is not credible, workers and firms will not expect inflation to rise so they will increase their consumption and investment spending, which will decrease aggregate demand and increase inflation. D)Workers and firms will incorporate the decrease in interest rates into their expectations of inflation, and they will expect inflation to fall as a result of Bank of Canada's policy announcement. E)Workers and firms will reduce their consumption and investment spending in expectation of higher interest rates in the future.

If the economy experiences a(n)________, inflation will rise and real GDP will fall. A)negative supply shock B)positive supply shock C)increase in short-run aggregate supply D)a negative demand shock E)positive demand shock

Leverage is A)a measure of the level of investment in an economy. B)a measure of assets in terms of net worth to be used as a proxy of how much room for debt an investor has when making an investment. C)a measure of how successfully an investor can negotiate the amount of debt assumed in making an investment. D)a measure of how much debt an investor assumes in making an investment. E)a measure of how likely a firm is to be able to influence government policy due to past campaign donations.

In the aftermath of the global financial crisis, it is generally accepted that record ________ on Wall Street played a significant role. A)high levels of leverage B)low levels of leverage C)high levels of liabilities D)low levels of liabilities E)government intervention