2.8-The philips curve Flashcards
What does the Phillips Curve illustrate?
The relationship between inflation and unemployment.
True or False: The Phillips Curve suggests that lower unemployment rates can lead to higher inflation.
True.
Fill in the blank: The original Phillips Curve was based on data from _______.
the United Kingdom.
What is the primary implication of the Phillips Curve for policymakers?
There is a trade-off between inflation and unemployment.
Which economist is primarily associated with the development of the Phillips Curve?
A.W. Phillips.
What happens to the Phillips Curve in the long run, according to economists?
It becomes vertical at the natural rate of unemployment.
Multiple Choice: What is the shape of the short-run Phillips Curve?
Downward sloping.
True or False: The Phillips Curve has remained stable over time.
False.
What economic phenomenon challenged the Phillips Curve in the 1970s?
Stagflation.
Fill in the blank: The natural rate of unemployment is also known as the _______.
non-accelerating inflation rate of unemployment (NAIRU).
What does a rightward shift of the Phillips Curve indicate?
Higher inflation for the same level of unemployment.
Multiple Choice: Which factor can lead to a shift in the Phillips Curve?
Supply shocks.
What is the effect of expectations on the Phillips Curve?
Expectations of inflation can shift the curve.
True or False: The Phillips Curve is a short-term concept only.
True.
Fill in the blank: The trade-off suggested by the Phillips Curve may not hold in the _______.
long run.
What is the relationship between inflation and unemployment in the long run according to the Phillips Curve?
No trade-off exists; only the natural rate of unemployment is relevant.
Multiple Choice: An increase in aggregate demand typically leads to:
Lower unemployment and higher inflation.
What role does monetary policy play concerning the Phillips Curve?
It can be used to influence inflation and unemployment.
True or False: The Phillips Curve indicates that inflation and unemployment are directly proportional.
False.
Fill in the blank: The concept of the Phillips Curve can be represented mathematically as _______.
π = πe - β(u - u), where π is inflation, πe is expected inflation, u is unemployment, and u is the natural rate of unemployment.
What does β represent in the Phillips Curve equation?
The sensitivity of inflation to unemployment.
Multiple Choice: Which economic condition is characterized by high inflation and high unemployment?
Stagflation.
What is a key criticism of the Phillips Curve?
It oversimplifies the relationship between inflation and unemployment.
Fill in the blank: According to modern interpretations, the Phillips Curve may shift due to changes in _______.
inflation expectations.
