Question : 11) The long-run Phillips curve a A) horizontal line indicating a : 1240622

11) The long-run Phillips curve is a

A) horizontal line indicating a positive relationship between inflation and unemployment.

B) vertical line indicating a positive relationship between inflation and unemployment.

C) vertical line that shows the relationship between inflation and unemployment when the economy is at full employment.

D) horizontal line that shows the relationship between inflation and unemployment when the economy is at full employment.

E) straight line with a 45 degree slope showing the long-run relationship between the inflation rate and the expected inflation rate.

12) The long-run Phillips curve is ________ curve, and moving along the long-run Phillips curve, an increase in the inflation rate is associated with ________ in the natural unemployment rate.

A) a vertical; no change

B) a downward sloping; a decrease

C) an upward sloping; an increase

D) a horizontal; no change

E) a downward sloping; no change

13) The lack of a long-run tradeoff between the unemployment rate and the inflation rate means that

A) only fiscal policy is effective to lower the natural unemployment rate.

B) an increase in the inflation rate would not bring a reduction in the natural unemployment rate.

C) only a decrease in the inflation rate would bring a reduction in the natural unemployment rate.

D) only monetary policy is effective to lower the natural unemployment rate.

E) the natural unemployment rate cannot change.

14) The long-run Phillips curve applies when the economy is at full employment, so the long-run Phillips curve is

A) vertical.

B) horizontal.

C) upward sloping.

D) downward sloping.

E) unnecessary.

15) On the long-run Phillips curve, the unemployment rate

A) and inflation rate can take any value.

B) can be any value, but the inflation rate equals the expected inflation rate.

C) equals the natural unemployment rate, but the inflation rate can be any value.

D) equals the natural unemployment rate, and the inflation rate equals the expected inflation rate.

E) decreases when the inflation rate increases.

16) In the long run, the inflation rate

A) is equal to the natural inflation rate.

B) is zero.

C) can take on any value.

D) must be equal to the natural unemployment rate.

E) cannot be negative.

17) The long-run Phillips curve indicates that

A) any inflation rate is possible at the natural unemployment rate.

B) there is a tradeoff between the inflation rate and the unemployment rate in the long-run.

C) there is no way to control the inflation rate in the long run.

D) potential GDP can never be achieved.

E) any unemployment rate is possible at the natural inflation rate.

18) Along the long-run Phillips curve, the unemployment rate ________, and the inflation rate ________.

A) is equal to the natural unemployment rate; can be any value

B) can be any value; is equal to the natural inflation rate

C) is equal to the natural unemployment rate; is equal to the natural inflation rate

D) can be any value; can be any value

E) None of the above answers is correct.

19) The long-run Phillips curve applies when the economy is at full employment, so the long-run Phillips curve is ________, which demonstrates that changes in the inflation rate ________ effect on unemployment.

A) vertical; have no

B) vertical; have an

C) a downward sloping straight line with a 45 degree slope; have an

D) an upward sloping straight line with a 45 degree slope; have an

E) horizontal; have no

20) Burger King is paying $9 an hour to its workers. If the expected inflation rate equals the actual inflation rate and both are 10 percent a year, then to keep the real wage rate constant in a year the money wage rate must

A) rise to $9.90 an hour.

B) fall to $8.10 an hour.

C) stay at $9.00 an hour.

D) rise to $10.00 an hour.

E) rise to $9.45 an hour.