Phillips Curve

Question 1

What is a historical inverse relationship between the rate of unemployment and the rate of inflation in an economy?

Answer 1

The Phillips Curve

Question 2

In 1960 Paul Samuelson and Robert Solow took Phillips work and found that when inflation was _______ unemployment was ______ and vice-versa.

Answer 2

High

Low

Question 3

High levels of both inflation and unemployment is known as what?

Answer 3

Stagflation

Question 4

Phillips curve came under attack because of stagflation from a group of economists lead by who?

Answer 4

Milton Friedman

Question 5

Who won the Nobel Prize in Economics in 2006 for using the natural Rate of unemployment to explain short and long term Phillips Curve?

Answer 5

Edmund Phelps

Question 6

The NAIRU says that when unemployment is at the rate defined by the long-run Phillips Curve line, __________ will be stable.

Answer 6

Inflation

Question 7

NAIRU says in the short-term Phillips Curve policy makers will face an inflation-unemployment ___________.

Answer 7

Trade off

Question 8

Reduction in unemployment below the “Natural Rate” will be temporary and lead only to higher ___________ in the long run.

Answer 8

Inflation

Question 9

NAIRU stands for?

Answer 9

non-accelerating inflation rate of unemployment

Question 10

NAIRU arises because with unemployment below it, inflation ___________ but with unemployment above it, inflation ____________.

Answer 10

Accelerates

Decelerates

Question 11

The rational expectations theory said that expectations of inflation were ________ to what actually happened.

Answer 11

Equal

Question 12

Most economists today no longer use the Phillips curve in its original form because it was shown to be too what?

Answer 12

Simplistic

Question 13

The short-run Phillips Curve is also called the what?

Answer 13

Expectations-augmented Phillips Curve

Question 14

The long-run Phillips curve or natural Rate of unemployment is known as the what?

Answer 14

NAIRU or non-accelerating inflation rate of unemployment

Question 15

Who produced the triangle model?

Answer 15

Robert J. Gordon

Question 16

The triangle model says the inflation rate is the sum of what three things?

Answer 16

Demand pull or short term Phillips curve

Cost push or supply shocks

Built-in inflation

Question 17

Low unemployment and high inflation for a long time shifts the short-run Phillips curve __________ and _________.

Answer 17

Rightward

Upward

Question 18

High unemployment and low inflation for a long time shifts the short-run Phillips curve _________ and _________.

Answer 18

Leftward

Downward

Question 19

A positive relation between the rate of inflation and the level of demand, and a negative relation between rate of inflation and unemployment is called what?

Answer 19

New Keynesian Phillips Curve

Question 20

Williams Phillips originally wrote about nominal wages and unemployment, who took his work and made a relationship between unemployment and inflation?

Answer 20

Paul Samuelson

Robert Solow

Question 21

What are the two main factors shifting the short-run Phillips Curve?

Answer 21

Supply shocks

Changes in built in inflation

Question 22

The Phillips curve started as an empirical observation in search of a what?

Answer 22

Theoretical explanation

Question 23

Who said there is a short term correlation between inflation shocks and employment?

Answer 23

Milton Friedman

Question 24

Workers do not encounter their employers in a perfect market but rather a complex combination of __________ markets.

Answer 24

Imperfect

Question 25

Built-in inflation is not “inflationary expectations” but rather that high inflation gathers ____________ and continues beyond the time it was started.

Answer 25

Momentum

Question 26

Low unemployment raises the workers bargaining power allowing for a push of higher nominal wages. To protect profits, employers do what?

Answer 26

Raise prices

Question 27

Who rejects the Phillips Curve altogether and says inflation is rather a combination of a lot of factors?

Answer 27

Jeffery Herbner

Question 28

Edmund Phelps distinguished between long and short term Phillips curve to explain what?

Answer 28

Stagflation