1. If inflation is greater than expected, then the unemployment rate is a. above the natural rate. In the long run the short-run Phillips curve will shift right b. above the natural rate. In the long run the short-run Phillips curve will shift left. c. below the natural rate. In the long run the short-run Phillips curve will shift right. d. below the natural rate. In the long run the short-run Phillips curve will shift left 2. A favorable supply shock will cause a. unemployment to rise and the short-run Phillips curve to shift right. b. unemployment to rise and the short-run Phillips curve to shift left c. unemployment to fall and the short-run Phillips curve to shift right d. unemployment to fall and the short-run Phillips curve to shift left. 3. If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is c. 23 Figure 35-7 Use this graph to answer the questions below 2 Inflation l Rate 1234 7 89 1 Unemployment Rate Refer to Figure 35-7. If the economy starts at 5% unemployment and 5% inflation then ifthe Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to a 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. b. 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. c. 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. d. 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. 1. If inflation is greater than expected, then the unemployment rate is a. above the natural rate. In the long run the short-run Phillips curve will shift right b. above the natural rate. In the long run the short-run Phillips curve will shift left. c. below the natural rate. In the long run the short-run Phillips curve will shift right. d. below the natural rate. In the long run the short-run Phillips curve will shift left 2. A favorable supply shock will cause a. unemployment to rise and the short-run Phillips curve to shift right. b. unemployment to rise and the short-run Phillips curve to shift left c. unemployment to fall and the short-run Phillips curve to shift right d. unemployment to fall and the short-run Phillips curve to shift left. 3. If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is c. 23 Figure 35-7 Use this graph to answer the questions below 2 Inflation l Rate 1234 7 89 1 Unemployment Rate Refer to Figure 35-7. If the economy starts at 5% unemployment and 5% inflation then ifthe Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to a 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. b. 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. c. 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. d. 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation