An increase in expected inflation ?
Correct answer: D. Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable
- A. shifts the short run Phillips curve downward and the unemployment inflation trade-off is less favorable.
- B. shifts the short-run Phillips curve upward and the unemployment inflation trade-off is more favorable
- C. Shift the short-run Phillips curve downward and the unemployment inflation trade-off is more favorable
- D. Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable
Explanation
Higher expected inflation shifts the short-run Phillips curve upward because a given unemployment rate is associated with higher actual inflation. The trade-off becomes less favorable because inflation is higher at every unemployment rate.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
When actual inflation exceeds expected inflation ?
The natural rate hypothesis argues that ?
If the sacrifice ratio is five, a reduction in inflation from 7 percent to 3 percent would require ?
If, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price level then the long-run Phillips curve ?
The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increase price and ?
The misery index Which some commentators suggest measures the health of the economy, is ?