RecallEasyPhillips curve history

Data from which country were originally used by A. W. Phillips to demonstrate the inverse relationship between unemployment and inflation?

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Why

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Not quite. A is correct.

A. W. Phillips conducted his foundational 1958 study using historical macroeconomic records from the United Kingdom.

A: why it's wrongA. W. Phillips published his seminal 1958 paper using data on unemployment and wage inflation from the United Kingdom between 1861 and 1957.

B: why it's wrongUnited States data were analyzed later in 1960 by Paul Samuelson and Robert Solow, not by Phillips in his original study.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

A. W. Phillips conducted his foundational 1958 study using historical macroeconomic records from the United Kingdom.

A: why it's wrongA. W. Phillips published his seminal 1958 paper using data on unemployment and wage inflation from the United Kingdom between 1861 and 1957.

C: why it's wrongFrench macroeconomic data were not used in the initial discovery of the Phillips curve.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

A. W. Phillips conducted his foundational 1958 study using historical macroeconomic records from the United Kingdom.

A: why it's wrongA. W. Phillips published his seminal 1958 paper using data on unemployment and wage inflation from the United Kingdom between 1861 and 1957.

D: why it's wrongCanadian data were not the basis for Phillips's original 1958 empirical work.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

A. W. Phillips conducted his foundational 1958 study using historical macroeconomic records from the United Kingdom.

B: why it's wrongUnited States data were analyzed later in 1960 by Paul Samuelson and Robert Solow, not by Phillips in his original study.

C: why it's wrongFrench macroeconomic data were not used in the initial discovery of the Phillips curve.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

A. W. Phillips conducted his foundational 1958 study using historical macroeconomic records from the United Kingdom.

B: why it's wrongUnited States data were analyzed later in 1960 by Paul Samuelson and Robert Solow, not by Phillips in his original study.

D: why it's wrongCanadian data were not the basis for Phillips's original 1958 empirical work.

Tap any option to see why it's right or wrong.

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ApplicationMediumPhillips curve specification

According to the Phillips curve relation, \pi_{t} = \pi^{e}_{t} + (m + z) - \alpha u_{t}, which of the following changes causes an increase in the current inflation rate \pi_{t}?

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Why

Tap an answer. The explanation will appear here, including why each wrong option is wrong.

Not quite. A is correct.

In the Phillips curve relation, expected inflation enters with a positive sign, so an increase in expected inflation directly increases current inflation.

A: why it's wrongAn increase in expected inflation leads wage setters to demand higher nominal wages, which firms pass on as higher prices, directly raising current inflation.

B: why it's wrongA higher unemployment rate weakens worker bargaining power, which reduces wage growth and lowers inflation.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

In the Phillips curve relation, expected inflation enters with a positive sign, so an increase in expected inflation directly increases current inflation.

A: why it's wrongAn increase in expected inflation leads wage setters to demand higher nominal wages, which firms pass on as higher prices, directly raising current inflation.

C: why it's wrongA decrease in the markup lowers prices relative to wages, which decreases the inflation rate.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

In the Phillips curve relation, expected inflation enters with a positive sign, so an increase in expected inflation directly increases current inflation.

A: why it's wrongAn increase in expected inflation leads wage setters to demand higher nominal wages, which firms pass on as higher prices, directly raising current inflation.

D: why it's wrongA decrease in z, such as less generous unemployment benefits, lowers nominal wages and decreases inflation.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

In the Phillips curve relation, expected inflation enters with a positive sign, so an increase in expected inflation directly increases current inflation.

B: why it's wrongA higher unemployment rate weakens worker bargaining power, which reduces wage growth and lowers inflation.

C: why it's wrongA decrease in the markup lowers prices relative to wages, which decreases the inflation rate.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

In the Phillips curve relation, expected inflation enters with a positive sign, so an increase in expected inflation directly increases current inflation.

B: why it's wrongA higher unemployment rate weakens worker bargaining power, which reduces wage growth and lowers inflation.

D: why it's wrongA decrease in z, such as less generous unemployment benefits, lowers nominal wages and decreases inflation.

Tap any option to see why it's right or wrong.

Not quite. A is correct.

In the Phillips curve relation, expected inflation enters with a positive sign, so an increase in expected inflation directly increases current inflation.

C: why it's wrongA decrease in the markup lowers prices relative to wages, which decreases the inflation rate.

D: why it's wrongA decrease in z, such as less generous unemployment benefits, lowers nominal wages and decreases inflation.

Tap any option to see why it's right or wrong.

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AnalysisHardPolicy and the Natural Rate

Suppose policymakers believe the natural rate of unemployment is higher than it actually is. If they formulate macroeconomic policy based on this overestimate, their actions are most likely to result in:

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Why

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Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

A: why it's wrongBelieving the natural rate is higher makes policymakers contract demand earlier, keeping unemployment unnecessarily high.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

A: why it's wrongBelieving the natural rate is higher makes policymakers contract demand earlier, keeping unemployment unnecessarily high.

B: why it's wrongOverestimating the natural rate leads policymakers to fear overheating at higher unemployment levels, leading to overly tight policy.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

A: why it's wrongBelieving the natural rate is higher makes policymakers contract demand earlier, keeping unemployment unnecessarily high.

C: why it's wrongBecause policymakers fear inflation will accelerate if unemployment drops below their estimated (inflated) target, they unnecessarily restrain demand, resulting in lower inflation and higher unemployment.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

A: why it's wrongBelieving the natural rate is higher makes policymakers contract demand earlier, keeping unemployment unnecessarily high.

D: why it's wrongAccelerating inflation occurs when policymakers underestimate the natural rate and run the economy too hot.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

B: why it's wrongOverestimating the natural rate leads policymakers to fear overheating at higher unemployment levels, leading to overly tight policy.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

B: why it's wrongOverestimating the natural rate leads policymakers to fear overheating at higher unemployment levels, leading to overly tight policy.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

B: why it's wrongOverestimating the natural rate leads policymakers to fear overheating at higher unemployment levels, leading to overly tight policy.

D: why it's wrongAccelerating inflation occurs when policymakers underestimate the natural rate and run the economy too hot.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

Tap any option to see why it's right or wrong.

Not quite. C is correct.

Overestimating the natural rate leads policymakers to maintain tighter policy than necessary to avoid perceived inflation risks, resulting in higher unemployment and lower inflation than necessary.

D: why it's wrongAccelerating inflation occurs when policymakers underestimate the natural rate and run the economy too hot.

Tap any option to see why it's right or wrong.

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