1. Describe the initial effect of the following events on the short-run and long-run Phillips curve. That is, describe the movements along a given curve or the direction of the shift in the curve. a) An increase in expected inflation b) An increase in the price of imported oil c) An increase in the money supply d) A decrease in government spending e) A decrease in the minimum wage, which lowers the natural rate

2. Use the Phillips curves in Exhibit 1 to answer the following questions.

Long-run Phillips Curve Rate Inflation A 15% DVB GE C 10% Short-run Phillips Curve for H F expected inflation of 15% 5% Short-run Phillips Curve for expected inflation of 10% Short-run Phillips Curve for expected inflation of 5% Natural rate of Unemployment Unemployment Rate