Lesson M2.8.1

M2.8.1 NAIRU, the short-run and long-run Phillips Curve and its usefulness Quiz: OCR Economics, Unit 7

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M2.8.1, NAIRU, the short-run and long-run Phillips Curve and its usefulness: 20 multiple choice questions for the OCR Economics (H460), Unit 7: Economic policy objectives, written with Revision Ninja.

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The 20 questions

  1. What historical economic variables did A.W. Phillips find an inverse trade-off between?

    • Inflation and interest rates
    • Wages and unemployment
    • Output and price level
    • Taxation and spending

  2. What macroeconomic variables are traded off in the short-run Phillips curve?

    • Savings and investment
    • Inflation and unemployment
    • Imports and exports
    • Growth and trade balance

  3. What shape is the Long-Run Phillips Curve on a standard diagram?

    • Upward sloping
    • Vertical
    • Horizontal
    • Downward sloping

  4. In the acronym NAIRU, what does the letter 'A' stand for?

    • Average
    • Accelerating
    • Aggregate
    • Annual

  5. Which types of unemployment form the natural rate of unemployment at NAIRU?

    • Frictional and structural
    • Voluntary and involuntary
    • Cyclical and seasonal
    • Demand-deficient and real-wage

  6. According to monetarists, what causes the Short-Run Phillips Curve to shift upwards?

    • Higher interest rates
    • Higher exchange rates
    • Higher tax rates
    • Higher inflation expectations

  7. Which macroeconomic issue in the 1970s broke the short-run Phillips curve relationship?

    • Disinflation
    • Hyperinflation
    • Stagflation
    • Deflation

  8. Which type of policy is needed to permanently shift the LRPC to the left?

    • Protectionist trade policy
    • Expansionary monetary policy
    • Supply-side policy
    • Expansionary fiscal policy

  9. If actual unemployment is kept below the NAIRU, what happens to inflation?

    • It remains zero
    • It falls rapidly
    • It accelerates
    • It turns negative

  10. What movement along the short-run Phillips curve results from increased aggregate demand?

    • Upwards along curve
    • Shift to right
    • Downwards along curve
    • Shift to left

  11. What is the long-run outcome of an expansionary fiscal policy according to monetarist theory?

    • Lower inflation only
    • Lower unemployment only
    • Higher inflation only
    • Higher GDP permanently

  12. How does a sharp increase in global oil prices affect the short-run Phillips curve?

    • Movement upwards along
    • Shift to right
    • Movement downwards along
    • Shift to left

  13. If government policy successfully reduces frictional unemployment, how does the LRPC shift?

    • Moves downwards along
    • Shifts leftwards
    • Shifts rightwards
    • Moves upwards along

  14. What happens to the short-run Phillips curve if workers expect lower future inflation?

    • Moves left along
    • Moves right along
    • Shifts downwards
    • Shifts upwards

  15. What happens to the rate of inflation when actual unemployment equals the NAIRU?

    • Stable inflation
    • Accelerating inflation
    • Zero inflation
    • Falling inflation

  16. How does hysteresis in the labour market affect the NAIRU after a deep recession?

    • Eliminates the NAIRU
    • Decreases the NAIRU
    • Increases the NAIRU
    • Leaves NAIRU unchanged

  17. Under rational expectations theory, what is the effect of an anticipated demand expansion?

    • Lower unemployment only
    • Higher inflation only
    • Higher output permanently
    • Lower inflation only

  18. If actual inflation exceeds expected inflation, what happens initially to firms' real wage costs?

    • Real wages rise
    • Real wages fall
    • Real wages double
    • Real wages unchanged

  19. Why is the Phillips curve considered unreliable for fine-tuning government economic policy?

    • Constant inflation expectations
    • Predictable expectations
    • Uncertain NAIRU position
    • Vertical short-run curve

  20. If structural unemployment increases in an economy, how does the short-run Phillips curve shift?

    • Shifts leftwards
    • Becomes horizontal
    • Becomes vertical
    • Shifts rightwards

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