Answer to Question #219441 in Microeconomics for bobie

Question

1.    If the long-run Phillips curve shifts to the right, for any given rate of money growth and inflation the economy will have

a.     higher unemployment and higher output.

b.    higher unemployment and lower output.

c.     lower unemployment and higher output.

d.    lower unemployment and lower output.

Answer 1

EXPLANATION

c. lower unemployment and higher output.

When actual inflation exceeds expected inflation, unemployment is less than the natural rate of unemployment. shifts the short-run Phillips curve downward, and the unemployment-inflation trade-off is more favourable.