The short-run Phillips curve is based on the assumption of:
a. a direct relationship between the inflation rate and unemployment.
b. an inverse relationship between the inflation rate and unemployment.
c. no relationship between the inflation rate and unemployment

Attempts to fine-tune the economy through shifts in fiscal and monetary policy

A) cannot alter the level of unemployment but may change the price level. B) may not do any good but certainly do no harm. C) produce greater stability, but only at the cost of an ever-increasing national debt. D) will increase rather than reduce instability if the policy makers lack adequate information.

Describe the effects of contractionary monetary policy by the domestic central bank on output, the real interest rate, and net exports in both the domestic and foreign country, using a Keynesian model in the short run

What happens in the long run? Show a diagram to illustrate the short- and long-run effects in both countries.