The Phillips Curve shows the short-run tradeoff between: a. GDP growth and taxes. b. Government expenditures and taxes. c. Inflation and unemployment. d. Recession and boom times. 2. Any increase in G or decrease in T will: a. Move the economy upward and to the left along the Phillips Curve. b. Decrease inflation. c. Increase unemployment. d. Decrease a deficit.
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The inflation-expectations-augmented Phillips curve implies that: a. Unemployment is at its natural rate when expected inflation is equal to actual inflation. b. Stagflation occurs when expected inflation is below actual inflation. c. Stagflation occurs when the short-run Phillips curve shifts left. d. The inflation rate is equal to the real output growth rate plus the monetary growth rate.
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If inflation expectations rise, how do the short-run Phillips curve and unemployment change? a. The short-run Phillips curve shifts right, so that at any inflation rate unemployment is higher. b. The short-run Phillips curve shifts left, so that at any inflation rate unemployment is higher. c. The short-run Phillips curve shifts right, so that at any inflation rate unemployment is lower. d. The short-run Phillips curve shifts left, so that at any inflation rate unemployment is lower.
Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer: a. A recession. b. A stock market collapse that hurts consumer and business confidence. c. Extremely rapid growth of exports. d. Rising inflation. e. A rise in the natural rate of unemployment. f. A rise in oil prices.
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