quanda35 - Chapter 35 1 Describe the initial effect of the...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 35 1. Describe the initial effect of the following events on the short-run and long-run Phillips curve. That is, describe the movements along a given curve or the direction of the shift in the curve. a. An increase in expected inflation Answer: Shifts short-run Phillips curve to the right (upward). b. An increase in the price of imported oil Answer: Shifts short-run Phillips curve to the right (upward). c. An increase in the money supply Answer: Move up the short-run Phillips curve. d. A decrease in government spending Answer: Move down the short-run Phillips curve. e. A decrease in the minimum wage, which lowers the natural rate Answer: Long-run and short-run Phillips curves shift left (downward). 2. Use the Phillips curves in Exhibit 1 to answer the following questions. Exhibit 1
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Practice Questions to accompany Mankiw & Taylor: Economics 2 a. At what point is the economy located if people expect 10 per cent inflation and inflation actually is 10 per cent? Answer: E. b. Referring to (a) above, is unemployment above, below, or equal to the natural rate? Answer:
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quanda35 - Chapter 35 1 Describe the initial effect of the...

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