The Phillips Curve Relates the Inflation Rate to The

The Phillips curve relates the inflation rate to the: a. unemployment rate. b. GDP. c. disposable personal income. d. interest rate. Suppose that the economy experiences an increase in the inflation rate at the same time that the unemployment rate decreases. This situation indicates a: a. shift in the Phillips curve. b. movement along a vertical Phillips curve. c. movement along a horizontal Phillips curve. d. movement along a positively-sloped Phillips curve. e. movement along a negatively-sloped Phillips curve. The long-run Phillips curve: a. is downward sloping. b. is upward sloping. c. shows there is no tradeoff between unemployment and inflation. d. is horizontal at the natural rate of inflation. Exhibit 1 Inflation and unemployment rates

I n f l a t i o n r a t e 8 ( p e r c e n t )

0 1 2 3 4 5 6 7 8 9 U n e m p l o y m e n t r a t e ( p e r c e n t ) The name of the graph in Exhibit 1 is the: a. Laffer curve. b. aggregate supply curve. c. aggregate demand curve. d. Keynesian curve. e. Phillips curve. The graph in Exhibit 1 indicates a: a. direct relationship. b. quadratic relationship. c. exponential relationship. d. inverse relationship. e. hyperbolic relationship. In Exhibit 1, when the unemployment rate goes from 3 percent to 9 percent, a. the level of inflation is unaffected. b. the inflation rate goes from 8 percent to 14 percent. c. the inflation rate goes from 8 percent to 3 percent. d. the inflation rate goes to 0 percent. e. deflation occurs.

In Exhibit 1, when the unemployment rate goes from 9 percent to 1 percent, the: a. level of inflation is unaffected. b. inflation rate goes from 3 percent to 14 percent. c. inflation rate goes from 3 percent to 8 percent. d. inflation rate goes from 3 percent to 8 percent. e. inflation rate goes from 8 percent to 14 percent.