5.3 Inflation and Unemployment

• What is inflation defined as?

  Rising general price level
• Match the type of inflation with its cause:

  Demand-pull ↔️ Increased aggregate demand

  Cost-push ↔️ Increased production costs
• Structural unemployment arises due to technological changes or shifts in the economy that make certain skills obsolete.


  True
• The short-run Phillips curve illustrates an inverse relationship between inflation and unemployment.


  True
• Demand-pull inflation occurs when aggregate demand exceeds available supply.


  True
• Match the type of unemployment with its cause:

  Frictional unemployment ↔️ Temporary mismatch between jobs and workers

  Structural unemployment ↔️ Changes in the economy leading to a mismatch of skills

  Cyclical unemployment ↔️ Fluctuations in the business cycle and aggregate demand
• A recent college graduate searching for a job is experiencing frictional unemployment.


  True
• During an economic recession, unemployment tends to increase, while inflation decreases.


  True
• The natural rate of unemployment is consistent with stable inflation in the long run.


  True
• Cost-push inflation is caused by increased production costs, such as higher wages or raw material prices.


  True
• Frictional unemployment is caused by a temporary mismatch between jobs and workers.
• Frictional unemployment is the normal turnover of jobs as workers change jobs.
• Inflation is the rate at which the general level of prices for goods and services in an economy is rising
• Unemployment refers to the state of being without a job despite being able and willing to work
• During which phase of the business cycle does cyclical unemployment rise?

  Recession
• The short-run Phillips curve illustrates an inverse relationship between inflation and unemployment
• The long-run Phillips curve is vertical, indicating no long-run tradeoff between inflation and unemployment
• In the long run, the economy gravitates towards the natural rate of unemployment
• Demand-pull inflation occurs when aggregate demand exceeds the available supply.
• What does unemployment refer to?

  Being without a job
• During which phase of the business cycle does cyclical unemployment typically rise?

  Recession
• What happens to unemployment during an economic expansion according to the short-run Phillips curve?

  Decreases
• What is the primary cause of cost-push inflation?

  Increased production costs
• Structural unemployment is often caused by technological changes or shifts in the economy
• Match the example with the type of unemployment:

  Recent college graduate ↔️ Frictional

  Coal miner losing job ↔️ Structural

  Retail worker laid off during recession ↔️ Cyclical
• What happens to unemployment during an economic expansion according to the short-run Phillips curve?

  Decreases
• What does the long-run Phillips curve suggest policymakers cannot achieve without accelerating inflation?

  Reduce unemployment below natural rate