Innovative Economics Phillips Curve Test - 72+ MCQs: Economics - Phillips Curve Quiz: Assess Your Understanding with Questions and Answers

1. Which critique suggests that the Phillips Curve relationship may shift over time?

Monetarist critique

Keynesian critique

Rational expectations critique

Supply-side critique

2. What is the main implication of the 'Natural Rate Hypothesis' for the Phillips Curve?

It is horizontal in the long run

It is vertical in the long run

It is upward-sloping in the long run

It is downward-sloping in the long run

3. In the context of the Phillips Curve, what does 'hysteresis' refer to?

A phenomenon where temporary unemployment becomes permanent

A theory explaining cyclical economic fluctuations

A measure of economic inequality

A concept related to fiscal policy

4. Which factor can cause the Phillips Curve to shift in the short run?

Changes in monetary policy

Long-term economic growth

Shifts in aggregate supply

Technological advancements

5. Which of the following can cause a shift in the Phillips Curve?

Changes in consumer spending

Technological advancements

Shifts in aggregate demand

All of the above

6. Which of the following best describes a 'deflationary gap'?

A situation where actual output is below potential output

A situation where aggregate demand exceeds aggregate supply

A situation where inflation is negative

A situation where unemployment is below its natural rate

7. Which term refers to a situation where there is an economic downturn accompanied by deflation?

Stagflation

Hyperinflation

Recession

Disinflation

8. What does the concept of 'adaptive expectations' suggest in the context of the Phillips Curve?

People form expectations based on past data and events.

People have perfect foresight about future inflation.

People adjust expectations immediately to any policy change.

People rely solely on government announcements for expectations.

9. What does the Natural Rate of Unemployment refer to?

Zero unemployment

Unemployment due to structural factors

Full employment without inflation

The highest sustainable employment level without accelerating inflation

10. How can a supply shock impact the Phillips Curve?

By causing a movement along the curve

By shifting the curve

By making the curve irrelevant

By causing a permanent increase in unemployment

11. What is one limitation of relying solely on the Phillips Curve for policymaking?

It assumes constant expectations about inflation.

It disregards the impact of supply shocks.

It neglects the influence of fiscal policy.

It focuses only on short-term economic fluctuations.

12. What impact can a supply shock have on the Phillips Curve?

It strengthens the inverse relationship

It weakens the inverse relationship

It shifts the curve vertically

It has no impact on the relationship

13. What does the 'Expectations-Augmented Phillips Curve' incorporate?

Adaptive expectations

Rational expectations

Static expectations

Dynamic expectations

14. What is a potential implication of a negative supply shock on the Phillips Curve relationship?

Higher inflation and lower unemployment

Lower inflation and higher unemployment

Lower inflation and lower unemployment

Higher inflation and higher unemployment

15. Which scenario is consistent with the long-run view of the Phillips Curve?

An economy with fluctuating inflation and unemployment rates

An economy where inflation decreases as unemployment rises

An economy where inflation remains constant despite changes in unemployment

An economy where inflation and unemployment move in opposite directions

16. What does the term 'stagflation' signify?

High economic growth and low inflation

High inflation and low economic growth

Low inflation and low economic growth

High inflation and high economic growth

17. Which term describes the situation when the economy is producing at its potential and the unemployment rate is at the natural rate?

Full employment equilibrium

Stagflation

Hyperinflation

Recessionary gap

18. Which term describes a policy that aims to reduce inflation at the cost of increased unemployment in the short run?

Expansionary policy

Supply-side policy

Monetarist policy

Contractionary policy

19. What does the 'Lipsey curve' primarily illustrate?

The relationship between inflation and unemployment

The inverse relationship between job vacancies and unemployment

The impact of supply shocks on economic outcomes

The effect of fiscal policy on economic stabilization

20. What can cause a movement along the Phillips Curve in the short run?

Technological advancements

Changes in aggregate demand

Shifts in aggregate supply

Long-term economic growth

21. Which of the following is a potential consequence of a positive supply shock?

Increased inflation and reduced unemployment

Decreased inflation and increased unemployment

Increased inflation and increased unemployment

Decreased inflation and reduced unemployment

22. What is the long-run implication of the Phillips Curve in its traditional form?

A constant trade-off between inflation and unemployment

An inverse relationship between inflation and unemployment

A direct relationship between inflation and unemployment

No relationship between inflation and unemployment

23. How does the concept of 'adaptive expectations' relate to the Phillips Curve?

It suggests that individuals base future expectations solely on past experiences

It introduces the idea of rational expectations

It argues that expectations have no impact on economic outcomes

It focuses on forward-looking expectations

24. Who first introduced the concept of the Phillips Curve?

John Maynard Keynes

Alan Greenspan

A.W. Phillips

Milton Friedman

25. How might supply-side shocks impact the Phillips Curve relationship?

By reinforcing the inverse relationship between inflation and unemployment

By causing movements along the Phillips Curve

By leading to stagflation scenarios

By making the Phillips Curve irrelevant

26. How does the 'Long-Run Phillips Curve' differ from the 'Short-Run Phillips Curve'?

The Long-Run Phillips Curve is vertical, while the Short-Run Phillips Curve is horizontal

The Long-Run Phillips Curve is horizontal, while the Short-Run Phillips Curve is vertical

Both curves are vertical but at different levels of unemployment

Both curves are horizontal but at different levels of inflation

27. Who is credited with introducing the concept of the Phillips Curve?

Alban William Phillips

John Maynard Keynes

Milton Friedman

Paul Samuelson

28. In the context of the Phillips Curve, what does 'stagflation' refer to?

High inflation and low unemployment

Low inflation and high unemployment

High inflation and high unemployment

Low inflation and low unemployment

29. What does the Phillips Curve primarily illustrate?

The relationship between fiscal deficit and inflation

The relationship between money supply and interest rates

The relationship between aggregate demand and aggregate supply

The relationship between inflation and unemployment

30. Which term is used to describe a situation where inflation increases while unemployment remains low?

Stagflation

Hyperinflation

Deflation

Disinflation

31. Who originally proposed the Phillips Curve?

A.W. Phillips

John Maynard Keynes

Milton Friedman

Paul Samuelson

32. What is the primary criticism of the Phillips Curve?

It oversimplifies the relationship between inflation and unemployment

It neglects the role of expectations in influencing economic outcomes

It fails to account for supply-side factors

All of the above

33. Which term describes a situation where inflation increases while unemployment decreases?

Disinflation

Deflation

Hyperinflation

Reflation

34. How do rational expectations impact the effectiveness of using the Phillips Curve for policy purposes?

They enhance the predictive power of the Phillips Curve

They diminish the predictive power of the Phillips Curve

They have no impact on the predictive power of the Phillips Curve

They make the Phillips Curve irrelevant for policy purposes

35. What does the 'Long Run Phillips Curve' depict?

It illustrates the relationship between inflation and unemployment in the short run

It focuses on the impact of supply shocks on economic outcomes

It represents the natural rate of unemployment

It shows the relationship between inflation and unemployment in the long run

36. What does the Phillips Curve suggest about the relationship between inflation and unemployment?

There is a direct relationship

There is an inverse relationship

There is no relationship

The relationship is cyclical

37. Which of the following best describes the short-run Phillips Curve?

Vertical line

Horizontal line

Downward sloping line

Upward sloping line

38. Who expanded upon A.W. Phillips' original work and introduced the concept of the 'expectations-augmented Phillips Curve'?

John Maynard Keynes

Milton Friedman

Paul Samuelson

John Hicks

39. What does 'cost-push inflation' refer to?

Inflation caused by excessive demand in the economy

Inflation caused by an increase in production costs

Inflation caused by monetary policy decisions

Inflation caused by an increase in consumer spending

40. What is 'hysteresis' in the context of the Phillips Curve?

A phenomenon where temporary unemployment becomes permanent

A theory explaining short-run economic fluctuations

A concept related to long-term economic growth

A measure of economic inequality

Economics - Phillips Curve MCQ Test 2