The Philips Curve

Question 1

What causes an increase in the current inflation rate?

Answer 1

An increase in the expected inflation rate, a reduction in the unemployment rate and an increase in the markup

Question 2

If expected rate of inflation is a function of last years inflation and unemployment has been greater for a number of years, we know that:

Answer 2

The rate of inflation should steadily decrease

Question 3

What will NOT cause an increase in the natural rate of unemployment?

Answer 3

An increase is the expected inflation rate