Ch. 19 EOC Problems: Phillips Curve

a. negative cost-push inflation./demand-pull inflation./an increase in expected inflation./negative demand-pull inflation.

a. negative cost-push inflation b. Phillips curve shifts down, output gap stays 0

above 5%/5%/0%/below 5%

above 5%

b

d

a. Expected/Total/Unexpected b. Nominal/Unexpected/Expected, nominal/expected/unexpected

a. Expected b. Unexpected, expected

a. downward/upward, higher/lower, downward/upward, higher/lower

a. upward, higher, downward, lower b. d

a

a

a. demand-pull inflation/a change in inflation expectations/cost-push inflation b. demand-pull inflation/a change in inflation expectations/cost-push inflation

a. demand-pull inflation b. cost-push inflation

not affect/increase/decrease

decrease

a. 3 b. 3

a, b, d

a. Point moves to 5% b. 5% unemployment rate

a. a movement along the Phillips curve downward and to the left/the Phillips curve to shift upward/the Phillips curve to shift downward/a movement along the Phillips curve upward and to the right/no change in the Phillips curve b. a movement along the Phillips curve downward and to the left/the Phillips curve to shift upward/the Phillips curve to shift downward/a movement along the Phillips curve upward and to the right/no change in the Phillips curve c. increase/decrease, falling/greater, higher/lower

a. the Phillips curve to shift upward b. no change in the Phillips curve c. increases, greater, higher

Foreign goods are cheaper for consumers, which decreases inflation./Competition with imported goods, which are now cheaper, causes businesses to lower their prices, decreasing inflation./Imported inputs are cheaper for businesses, which may lead to decreases in prices, decreasing inflation./Foreigners are less willing to buy American goods, which are not more expensive, causing businesses to lower their prices, decreasing inflation.

Direct effect: Foreign goods are cheaper for consumers, which decreases inflation. Indirect effect: Competition with imported goods, which are now cheaper, causes businesses to lower their prices, decreasing inflation.,Imported inputs are cheaper for businesses, which may lead to decreases in prices, decreasing inflation.,Foreigners are less willing to buy American goods, which are not more expensive, causing businesses to lower their prices, decreasing inflation.

Inflation last year was far greater than even the best forecaster expected, even though the output gap was zero./A devastating late-spring freeze destroys crops across the eastern United States./Consumer confidence increases unexpectedly, causing the output gap to become more positive.

Shift of the Phillips curve: Inflation last year was far greater than even the best forecaster expected, even though the output gap was zero., A devastating late-spring freeze destroys crops across the eastern United States. Movement along the Phillips curve: Consumer confidence increases unexpectedly, causing the output gap to become more positive.