SOLVED

26.3Â Â Inflation, Money, and the Phillips Curve 1) An inflation forecast developed in a Keynesian framework is likely to focus on A) Federal Reserve policy. B) international gold movements. C) household and business spending decisions. D) the velocity of money. 2) An inflation forecast developed in a Monetarist framework is likely to focus on A) Federal Reserve policy. B) interest rate movements. C) household and business spending decisions. D) the velocity of money. 3) In the Monetarists’ view, a one-time increase in the price level results from a(n) A) technological improvement. B) increase in the labor force. C) supply shock. D) interest-rate increase. 4) A tradeoff between inflation and unemployment is shown directly by the __________ curve. A) Fisher B) Phillips C) Friedman D) aggregate demand 5) The relationship between unemployment and inflation is A) nonexistent. B) positive. C) negative. D) None of the above. 6) The Phillips Curve implies a trade-off between A) investment and saving. B) inflation and unemployment. C) employment and income. D) investment and government deficits. 7) Which of the following assumptions indicates that there is no trade-off between inflation and unemployment? A) A vertical aggregate demand curve B) A vertical Phillips Curve C) Constant velocity D) Constant money supply growth rate 8) From the Keynesians’ perspective, a short-run Phillips Curve exists because A) wages and prices are perfectly flexible. B) money demand is unstable. C) investment is unstable. D) wages change more slowly than the price level. 9) The Monetarists argue that in the long run, the Phillips Curve is vertical because A) wages and prices are flexible. B) money demand is unstable. C) investment is unstable. D) wages change more slowly than the price level. 10) The assumption that wages change more slowly than prices implies that the A) aggregate demand curve has a positive slope. B) aggregate demand curve has a negative slope. C) Phillips Curve has a negative slope. D) Phillips Curve has a positive slope.