What will happen to the short-run Phillips curve? Suppose that this economy currently has an unemployment rate of 6%, inflation … The curve SRPC 1 is the short run Phillips Curve showing low or zero expected inflation. This expected rate of inflation was, in turn, built into a core rate of inflation for the economy through institutional arrangements such as negotiated labor contracts. Based on the sticky-price model, the short-run aggregate supply curve will be steeper, the greater the: Both models of aggregate supply discussed in Chapter 14 imply that if the price level is higher than expected, then output ______ natural rate of output. and taxes. As Expected Inflation Increases, The Short-run Phillips Curve Becomes Steeper. This paper studies the current state of inflation dynamics through the lens of the Phillips curve and assesses the degree of anchoring of inflation expectations. Oh no! The imperfect-information model assumes that producers find it difficult to distinguish between changes in: The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation. Thus the economy moves upward on the short-run Phillips curve SPC 1 from point A to B. illustration of real gross domestic product (GDP) over D. shifts to the right. expectations theory. 2. Disinflation : Disinflation can be illustrated as movements along the short-run and long-run Phillips curves. the short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 9 percent inflation Refer to Exhibit 6. When inf. D. is vertical. in taxes are largely offset by increases in savings. C. Shift to the Left. For example, in 2000 unemployment was U 1 > U * and the inflation rate was 5%. Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is: Analysis of the short-run Phillips curve suggests that policymakers who want to reduce unemployment in the short run should ______ aggregate demand at a cost of generating ______ inflation. true? In the article, A.W. Question: In The Long Run, An Increase In The Money Supply Growth Rate Raises Expected Inflation So The Short-run Phillips Curve Shifts Right. B. curve. The money hypothesis suggests that the Great Depression was caused by a: According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer: According to the sticky-price model, deviations of output from the natural level are _____ deviations of the price level from the expected price level. IS curve; shifts to the right because its a tax cut. a. Rational expectations theory does not imply that people always And the answer is…C. Question: If expected inflation increases: A. the short run Phillips Curve shifts to the right. In the sticky-price model, the imperfection is that: Each of the two models of short-run aggregate supply is based on some market imperfection. Solution for An increase in expected inflation shifts the a. long-run Phillips curve right. In the imperfect-information model, the imperfection is that: If only unanticipated changes in the money supply affect real GDP, the public has rational expectations, and everyone has the same information about the state of the economy, then: In the case of demand-pull inflation, other things being equal: In the sticky-price model, if no firms have flexible prices, the short-run aggregate supply schedule will: Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to ______ in the short run; and in the long run the expected price level will ______, causing the level of output to return to the natural level. A decrease in the price level shifts the ______ curve to the right, and the aggregate demand curve ______. random. But soon workers and firms find that the increase in … Rational expectations theory was developed before adaptive < 49/50 > CUESTIONS COMPLETED It looks like your browser needs an update. 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