Question : 41) The natural rate hypothesis concludes that the inflation rate : 1227971

41) The natural rate hypothesis concludes that the inflation rate increases, then in the short run there is

A) an upward movement along the short-run Phillips curve.

B) a downward movement along the short-run Phillips curve.

C) an upward shift of the short-run Phillips curve.

D) a downward shift of the short-run Phillips curve.

E) no change at all in the short-run Phillips curve.

42) The natural rate hypothesis concludes that when the inflation rate increases, then in the long run there is

A) an upward movement along the short-run Phillips curve.

B) a downward movement along the short-run Phillips curve.

C) an upward shift of the short-run Phillips curve.

D) a downward shift of the short-run Phillips curve.

E) no change at all in the short-run Phillips curve.

43) The natural rate hypothesis concludes that when the inflation rate unexpectedly increases, the unemployment rate ________. But when the higher inflation rate becomes the expected inflation rate, the unemployment rate then ________ until it reaches the ________ unemployment rate.

A) decreases; increases; maximum

B) increases; decreases; minimum

C) decreases; increases; natural

D) decreases; decreases; natural

E) increases; decreases; natural

44) According to the natural rate hypothesis, if the economy begins at full employment with an unemployment rate of 5 percent and then the inflation rate increases from 2 percent to 4 percent, then the economy will

A) have lower unemployment but then return to its natural rate with an inflation rate of 4 percent.

B) stay at the 4 percent inflation rate and the natural unemployment rate will fall.

C) not see any lower unemployment, even temporarily, just higher inflation.

D) eventually return to its natural rate of 2 percent inflation and a new lower unemployment rate.

E) eventually return to its natural rate of 2 percent inflation and its natural unemployment rate of 5 percent.

45) If the expected inflation rate changes, the long-run Phillips curve ________ and the short-run Phillips curve ________.

A) does not shift; does not shift

B) does not shift; shifts upward

C) shifts rightward; shifts upward

D) shifts rightward; shifts downward

E) shifts rightward; does not shift

46) The short run Phillips curve

A) shows the trade off between the inflation rate and the unemployment rate and it shifts when the inflation rate changes.

B) shows that any inflation rate can co-exist with the natural unemployment rate.

C) shows the trade off between the inflation rate and the unemployment rate and it shifts when the expected inflation rate changes.

D) shows the relationship between the inflation rate and the expected inflation rate and it shifts when the natural unemployment rate changes.

E) shows the relationship between the inflation rate and the nominal interest rate and it shifts when the natural unemployment rate changes.

47) If the expected inflation rate rises, then the short-run Phillips curve ________ and the long-run Phillips curve ________.

A) shifts; shifts

B) shifts; does not shift

C) does not shift; shifts

D) does not shift; does not shift

E) might shift; shifts only if the short-run Phillips curve shifts

48) An increase in the expected inflation rate

A) leads to a movement downward along the short-run Phillips curve.

B) leads to a movement upward along the short-run Phillips curve.

C) shifts the short-run Phillips curve upward.

D) shifts the short-run Phillips curve downward.

E) shifts the long-run Phillips curve upward.

49) Suppose an economy experiences a permanent increase in its expected inflation rate. As a result, there is

A) an upward movement along the short-run Phillips curve.

B) a downward movement along the short-run Phillips curve.

C) a downward shift of the short-run Phillips curve.

D) an upward shift of the short-run Phillips curve.

E) no change at all to the short-run Phillips curve.

50) Economies with higher expected inflation rates have short-run Phillips curves that are

A) upward sloping.

B) further to the left.

C) further to the right.

D) always vertical.

E) closer to being horizontal.