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- Subject
- The Phillips Curveeconomics-mcqs › the-phillips-curve
- Published
- 27 May 2019
- Last updated
- 28 May 2026
Explanation
When actual inflation is higher than expected inflation, firms increase production, leading to a decrease in unemployment below its natural rate. Conversely, if inflation is as expected, unemployment remains at its natural level, and if inflation is lower than expected, unemployment tends to rise above the natural rate.
More The Phillips Curve MCQs
Practice related questions from the same subject.
- 1.What is the likely effect of a credible and announced monetary policy tightening if individuals form rational expectations?
- 2.Refer to Exhibit 6. If the economy is initially at long-run equilibrium at point E, which point will the economy move toward following an unanticipated monetary tightening?
- 3.Refer to Exhibit 6. If the economy is initially at long-run equilibrium at point E, what point will the economy move toward following a sudden rise in government expenditure?
- 4.Based on Exhibit 6, if individuals anticipate a 3% inflation rate and the actual inflation rate is also 3%, at which point is the economy functioning?
- 5.What is the effect of a reduction in the price of imported oil on the short-run Phillips curve?
- 6.Which factor would cause the long-run Phillips curve to shift rightward?
- 7.According to the Phillips curve, what is the short-term effect on inflation if policymakers implement an expansionary policy to reduce unemployment?
- 8.What relationship does the short-run Phillips curve illustrate?
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