Title: The Phillips Curve
Course: TEST Course

Q: The ________ suggests a negative relationship between inflation and unemployment.
- aggregate demand curve
- long-run Phillips curve
- short-run Phillips curve
A: short-run Phillips curve

Q: Consider the short-run Phillips curve, the unemployment rate and inflation rate are considered to
- have a positive relationship.
- have an unknown relationship.
- have an inverse or negative relationship.
A: have an inverse or negative relationship.

Q: The Phillips curve illustrates a trade-off between ________ and ________.
- the natural rate of unemployment; inflation
- the natural rate of unemployment rate; the actual unemployment rate
- unemployment; inflation
A: unemployment; inflation

Q: What two economic areas is the Phillips curve illustrating that have an inverse relationship with each other?
- Inflation and the natural rate of unemployment.
- The actual unemployment rate and the natural rate of unemployment.
- Inflation and unemployment.
A: Inflation and unemployment.

Q: Acting from a Keynesian viewpoint, with inflation and unemployment negatively related, what should the Fed choose as its policy in an inflationary economy to move down the Phillips Curve and decrease inflation?
- Buy securities in the Open Market Operations (OMO).
- Increase taxes.
- Sell securities in the OMO (Open Market Operations).
A: Sell securities in the OMO (Open Market Operations).

Q: What policy actions should the Fed take, acting from a Keynesian viewpoint, with inflation and unemployment is inversely related, to move up the Phillips Curve in a recessionary economy and decrease unemployment?
- increase taxes
- sell securities in the OMO (Open Market Operations)
- buy securities in the Open Market Operations (OMO)
A: buy securities in the Open Market Operations (OMO)

Q: The Phillips curve is a ________ viewpoint.
- neoclassical
- monetarist
- Keynesian
A: Keynesian

Q: Which of the following viewpoints uses the Phillips curve?
- Neoclassical
- Monetarist
- Keynesian
A: Keynesian

Q: According to Keynesian views, the aggregate supply curve ________.
- slopes downward
- is horizontal
- slopes upward
A: slopes upward

Q: A typical Keynesian Phillips curve ________.
- slopes upward
- is horizontal
- slopes downward
A: slopes downward

Q: The Phillips Curve and the ________ are different ways of showing the same relationship between inflation and unemployment.
- supply curve
- aggregate demand curve
- AD-AS model
A: AD-AS model

Q: The AD-AS model and the ________ are different ways of showing the same relationship between unemployment and inflation.
- supply curve
- aggregate demand curve
- Phillips Curve
A: Phillips Curve

Q: A Phillips curve shows the tradeoff between unemployment and inflation, therefore ________.
- if one is low the other must be low
- if one is high the other must be high
- if one is higher the other must be low
A: if one is higher the other must be low

Q: A Phillips curve shows the tradeoff between inflation and unemployment, so if one is ________.
- low the other must be low
- high the other must be high
- low the other must be high
A: low the other must be high

Q: Which of the following statements is true about the Phillips Curve and Aggregate Supply curve?
- The short-run Aggregate Supply and Phillips Curve curves are upward sloping.
- During a recession when GDP is below potential, inflation is high according to the Keynesian zone of the AS curve.
- Along the Keynesian zone of an AS curve, inflation is low when unemployment is high.
A: Along the Keynesian zone of an AS curve, inflation is low when unemployment is high.

Q: When considering the Phillips Curve, which statement below is the most accurate?
- The short-run Phillips Curve and Aggregate Supply curves are upward sloping.
- During a recession when unemployment is high, inflation is also high in the Keynesian zone of the AS curve.
- Along the Keynesian zone of an AS curve, inflation is low when GDP is below potential.
A: Along the Keynesian zone of an AS curve, inflation is low when GDP is below potential.

Q: Referring to a Keynesian Phillips curve, a reduction in inflation is likely to cause:
- at least a slight increase in aggregate demand.
- at least a slight decrease in unemployment.
- at least a slight increase in unemployment.
A: at least a slight increase in unemployment.

Q: If inflation is decreasing what is likely happening along a Keynesian Phillips curve?
- A slight increase in aggregate demand.
- A slight decrease in unemployment.
- A slight increase in unemployment.
A: A slight increase in unemployment.

Q: Which of the following statement(s) about economic models is false?
- In the neoclassical model, the real wage adjusts to move the economy to full employment.
- In the Keynesian model, equilibrium is achieved by adjustments in aggregate demand, which equals aggregate income.
- In the Keynesian model, the real wage adjusts to move the economy to full employment.
A: In the Keynesian model, the real wage adjusts to move the economy to full employment.

Q: Which of the following statement(s) about economic models is true?
- In the Keynesian model, the real wage adjusts to move the economy to full employment.
- In the neoclassical model, equilibrium is achieved by adjustments in aggregate demand, which equals aggregate income.
- In the neoclassical model, the real wage adjusts to move the economy to full employment.
A: In the neoclassical model, the real wage adjusts to move the economy to full employment.

Q: The statement, ________matches Keynesian theory.
- “A typical business frequently changes its prices to adjust to changes in aggregate demand.”
- “The economy is always at the natural rate of unemployment levels.”
- “A typical business has sticky prices when aggregate demand fluctuates.”
A: “A typical business has sticky prices when aggregate demand fluctuates.”

Q: Which of the following is consistent with Keynesian theory?
- A typical firm changes its prices frequently to adjust to changes in aggregate demand.
- The economy is always at full employment.
- A typical firm does not change its prices immediately when aggregate demand fluctuates.
A: A typical firm does not change its prices immediately when aggregate demand fluctuates.

Q: In the long run, the Phillips curve ________.
- has a tradeoff between unemployment and inflation
- has a tradeoff between unemployment and the natural rate of unemployment.
- has no tradeoff between unemployment and inflation
A: has no tradeoff between unemployment and inflation

Q: In the long run, the Phillips curve will be ________ at the natural rate of unemployment.
- a horizontal line
- upward sloping
- a vertical line
A: a vertical line

Q: In a neoclassical economist’s world, an increase in taxes will
- raise the level of GDP.
- increase the natural rate of unemployment.
- lower the price level.
A: lower the price level.

Q: Decreasing taxes according to a neoclassical economist will
- lower GDP levels.
- increase the natural rate of unemployment.
- raise the price level.
A: raise the price level.