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Homework answers / question archive / True or False: 1) The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate
True or False:
1) The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.
2) If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.
3) The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.
4) An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.
Answer 1 = false
It doesn't move unemployment rate above its natural rate and expansionary policy is imposed to reduce the unemployment rate so it doesn't reach to the natural rate
Answer 2 = true
When feds increases money supply the excess supply causes inflation and increased inflation causes the unemployment rate to decrease.
Answer 3 = true
Answer 4 = true.
An increase in the natural rate of unemployment shifts the long run Philips curve to right.
