AP Macro Phillips Curve 1

Question 1

The Phillips Curve illustrates the short-run relationship between which two macroeconomic variables?

Accepted Answer

Inflation and unemployment

Answer

GDP growth and interest rates

Answer

Money supply and interest rates

Answer

Exports and imports

Question 2

Along the short-run Phillips Curve (SRPC), when unemployment decreases, inflation tends to:

Accepted Answer

Increase

Answer

Decrease

Answer

Remain constant

Answer

Turn negative (deflation)

Question 3

What does the Non-Accelerating Inflation Rate of Unemployment (NAIRU) represent on a Phillips Curve diagram?

Accepted Answer

The unemployment rate consistent with stable inflation

Answer

The inflation rate when unemployment is zero

Answer

The maximum possible unemployment rate in an economy

Answer

The minimum inflation rate a central bank can achieve

Question 4

If the economy is operating below the NAIRU, which of the following is most likely to occur over time?

Accepted Answer

Accelerating inflation

Answer

Deflation

Answer

Rising unemployment

Answer

Decreasing interest rates

Question 5

The concept of 'stagflation' in the 1970s challenged the simple Phillips Curve because it demonstrated that:

Accepted Answer

High inflation and high unemployment can occur simultaneously

Answer

Unemployment and inflation cannot coexist in any economy

Answer

The Phillips Curve slope was steeper than economists originally believed

Answer

Unemployment always causes deflation in the long run

Question 6

Which economists are primarily credited with developing the expectations-augmented Phillips Curve in the late 1960s?

Accepted Answer

Milton Friedman and Edmund Phelps

Answer

John Maynard Keynes and Paul Samuelson

Answer

A.W. Phillips and Robert Solow

Answer

Paul Volcker and Alan Greenspan

Question 7

A.W. Phillips originally developed the Phillips Curve relationship using wage and unemployment data from which country?

Accepted Answer

United Kingdom

Answer

United States

Answer

Germany

Answer

Japan