Question

Eurozone unemployment rose to 10.7 percent. At the same? time, Eurozone inflation unexpectedly rose to 2.7 percent a?year, up from the previous? month's 2.6 percent a year.

?Source:

Huffington

Post?,

March? 1, 2012

A very high unemployment rate can be accounted for by the Phillips curve model by all of the following

except?_______.

A.

a movement down along the? short-run Phillips curve if there is no change in the natural unemployment rate

B.

a rightward shift of the? long-run Phillips curve if the natural unemployment rate increases

C.

a rightward shift of the? short-run Phillips curve if the natural unemployment rate increases

D.

a movement up along the? long-run Phillips curve if the natural unemployment rate increases

Choose the statement that is incorrect about the Eurozone economy.

A.

The small rise in inflation brings a movement up along the? short-run Phillips curve.

B.

A rise in the expected inflation rate shifts the?short-run Phillips curve rightward.

C.

The tradeoff between inflation and unemployment became worse as the? short-run Phillips curve shifted rightward.

D.

The large increase in the natural unemployment rate shifts the? short-run Phillips curve and the?long-run Phillips curve rightward.

Answer 1

Solution-

1. A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except a movement up along the? long-run Phillips curve if the natural unemployment rate increases.

The correct option is D. a movement up along the long-run Phillips curve if the natural unemployment rate increases.

2. Choose the statement that is incorrect about the Eurozone economy.

The correct option is B. A rise in the expected inflation rate shifts the?short-run Phillips curve rightward.