Question 1

The Phillips curve was ________.

Accepted Answer

A)  adopted by economic policy teams in the Kennedy and Johnson administrations
B)  influential in efforts to bring the unemployment rate down to low levels
C)  discredited in the 1970s,when both inflation and unemployment were relatively high
D)  all of the above
E)  none of the aboveF) A) and D)
G) C) and D)

Question 2

When a price shock occurs,the inflation rate is affected ________.

Accepted Answer

A)  only in the period of the price shock
B)  only in the period after the price shock
C)  only if the price shock causes a change in output
D)  only if the price shock persists for more than one period
E)  none of the aboveF) A) and D)
G) B) and C)

Question 3

The short-run aggregate supply curve is π =  
+ 0.8 (Y - 20)+ ρ.Suppose inflation last year was 5 percent,current output is 20,and there is a price shock of 2 percent.Suppose,further,that potential output rises next year to 21,while output remains at 20 and next year's price shock is zero.Calculate and explain next year's inflation.

Accepted Answer

Current inflation is 5 + 0.8 (20 - 20)+ ...

Question 4

In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy.Many refineries went offline disrupting oil refining and distribution.What do you think was a likely result?

Accepted Answer

A)  the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right
B)  the restricted supply constituted a cost push shock that would have shifted the short run AS curve to the left
C)  the restricted supply constituted a cost push shock that would have meant an upward movement along the Phillips curve
D)  all of the above
E)  none of the aboveF) A) and B)
G) A) and C)

Question 5

How do you suppose most people form an expectation of future inflation? Is that method consistent with the assumption of adaptive expectations?

Accepted Answer

Like any mechanic in the Bronx,most peop...

Question 6

Which of the following is true in regards to Okun's law?

Accepted Answer

A)  employment does not increase commensurately with output rises because firms tend to hoard labor
B)  when demand increases,firms tend to work their employees harder and longer
C)  it is Okun's prediction of the negative relationship between the output and unemployment gaps that allows the modern Phillips curve to be translated into the AS curve
D)  all of the above
E)  none of the aboveF) B) and E)
G) A) and C)

Question 7

The idea behind the Phillips curve is that ________.

Accepted Answer

A)  when the unemployment rate is low wages will decrease
B)  tightness in the labor market puts upward pressures on wages and prices
C)  when firms raise wages to attract new workers,prices decrease
D)  all of the above
E)  none of the aboveF) C) and E)
G) B) and E)

Question 8

In the 1960s,advocates of the Phillips curve suggested ________.

Accepted Answer

A)  an "optimal" goal of 1% unemployment and 1% to 2% inflation rates could be achieved
B)  a "realistic" goal of 7% unemployment and 6% to 7% inflation rates could be achieved
C)  a "nonperfectionist" goal of 3% unemployment and 4% to 5% inflation rates could be achieved
D)  all of the above
E)  none of the aboveF) A) and B)
G) D) and E)

Question 9

If expectations about inflation are adaptive,they are ________.

Accepted Answer

A)  formed by looking at the future
B)  likely to change rapidly
C)  based on past inflation
D)  all of the above
E)  none of the aboveF) None of the above
G) B) and C)

Question 10

Which statement(s) is (are) consistent with a positive relationship between inflation and the output gap?

Accepted Answer

A)  If output rises above its potential level,the unemployment rate falls and firms will raise wages and prices more rapidly.
B)  In the short run,the AS curve is upward sloping.
C)  Through Okun's law,the negative relationship between the output and unemployment gaps allows the modern Phillips curve to be translated into the AS curve.
D)  all of the above
E)  none of the aboveF) A) and C)
G) A) and E)

Question 11

According to Okun's law,an increase in which of the following is associated with an increase in unemployment?

Accepted Answer

A)  inflation
B)  output
C)  expected inflation
D)  autonomous expenditure
E)  potential outputF) None of the above
G) A) and E)

Question 12

On the modern Phillips curve,the initial impact of productivity improvements that lower the costs of production is shown by ________.

Accepted Answer

A)  an upward movement along the Phillips curve to a higher inflation rate
B)  an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate
C)  a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate
D)  a downward movement along the Phillips curve to higher unemployment rates
E)  none of the aboveF) None of the above
G) C) and E)

Question 13

Why are changes in the output gap larger than changes in the unemployment gap? Why is the relationship expressed in Okun's law not affected by inflation or expected inflation?

Accepted Answer

Common sense suggests that output and un...

Question 14

According to the short-run aggregate supply curve,if output minus potential output equals zero,then ________.

Accepted Answer

A)  unemployment might be zero
B)  inflation might be stable
C)  expected inflation must be stable
D)  price shocks must be zero
E)  none of the aboveF) A) and C)
G) B) and E)

Question 15

When a price shock has occurred,inflation returns to its pre-shock rate ________.

Accepted Answer

A)  in the period following the price shock
B)  in the period when output has returned to its pre-shock rate
C)  once the output gap has returned to zero
D)  only in the long run
E)  none of the aboveF) B) and D)
G) C) and D)

Question 16

Suppose the output gap is zero,and policy makers wish to reduce the inflation rate from 10 percent to 5 percent.Which of these policies seems best?

Accepted Answer

A)  contractionary policies to reduce output at least 5 percent below potential output
B)  a convincing declaration of the inflation rate target,so that expected inflation falls to 5 percent
C)  no policy action;inflation will fall on its own,eventually
D)  no policy action;inflation will converge to its long-run rate,regardless of policy
E)  price and wage controls to counteract their stickinessF) All of the above
G) A) and B)

Question 17

What are price shocks? Why were they not included in the original formulation of the Phillips curve? Why were they added to the modern Phillips curve?

Accepted Answer

In the Phillips curve,inflation is deter...

Question 18

If the short-run aggregate supply curve is shifting down repeatedly,it is rather likely that ________.

Accepted Answer

A)  output is declining repeatedly,relative to potential output
B)  the long-run aggregate supply curve is shifting to the left
C)  negative price shocks are recurring
D)  all of the above
E)  none of the aboveF) B) and E)
G) A) and D)

Question 19

________ will cause a movement along the modern Phillips curve.

Accepted Answer

A)  An increase in oil prices
B)  An increase in the price of imports
C)  Wage agreements that include compensation for inflation
D)  all of the above
E)  none of the aboveF) A) and C)
G) B) and E)

Question 20

Based on the data in this table, 
If the inflation rate in period zero had been 3 percent,then the accelerationist Phillips curve is ________.

Accepted Answer

A)  Δπ = - 1.8 (U - 7) + ρ
B)  Δπ = - 1.1 (U - 6) + ρ
C)  Δπ = - 0.9 (U - 6) + ρ
D)  Δπ = - 0.4 (U - 9) + ρ
E)  none of the aboveF) A) and E)
G) B) and E)

Exam 11: Aggregate Supply and the Phillips Curve

How do you suppose most people form an expectation of future inflation? Is that method consistent with the assumption of adaptive expectations?

Correct Answer
verified
Like any mechanic in the Bronx,most peop...
View Answer

When a price shock occurs,the inflation rate is affected ________.

Correct Answer
verified

If expectations about inflation are adaptive,they are ________.

Correct Answer
verified

On the modern Phillips curve,the initial impact of productivity improvements that lower the costs of production is shown by ________.

Correct Answer
verified

Based on the data in this table, If the inflation rate in period zero had been 3 percent,then the accelerationist Phillips curve is ________.

Correct Answer
verified

In the 1960s,advocates of the Phillips curve suggested ________.

Correct Answer
verified

Which of the following is true in regards to Okun's law?

Correct Answer
verified

When a price shock has occurred,inflation returns to its pre-shock rate ________.

Correct Answer
verified

________ will cause a movement along the modern Phillips curve.

Correct Answer
verified

According to the short-run aggregate supply curve,if output minus potential output equals zero,then ________.

Correct Answer
verified

The idea behind the Phillips curve is that ________.

Correct Answer
verified

Why are changes in the output gap larger than changes in the unemployment gap? Why is the relationship expressed in Okun's law not affected by inflation or expected inflation?

Correct Answer
verified
Common sense suggests that output and un...
View Answer

Suppose the output gap is zero,and policy makers wish to reduce the inflation rate from 10 percent to 5 percent.Which of these policies seems best?

Correct Answer
verified

If the short-run aggregate supply curve is shifting down repeatedly,it is rather likely that ________.

Correct Answer
verified

In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy.Many refineries went offline disrupting oil refining and distribution.What do you think was a likely result?

Correct Answer
verified

The Phillips curve was ________.

Correct Answer
verified

Correct Answer
verified
Current inflation is 5 + 0.8 (20 - 20)+ ...
View Answer

Which statement(s) is (are) consistent with a positive relationship between inflation and the output gap?

Correct Answer
verified

What are price shocks? Why were they not included in the original formulation of the Phillips curve? Why were they added to the modern Phillips curve?

Correct Answer
verified
In the Phillips curve,inflation is deter...
View Answer

According to Okun's law,an increase in which of the following is associated with an increase in unemployment?

Correct Answer
verified

Exam 11: Aggregate Supply and the Phillips Curve

How do you suppose most people form an expectation of future inflation? Is that method consistent with the assumption of adaptive expectations?

Correct AnswerverifiedLike any mechanic in the Bronx,most peop...View AnswerShow Answer

When a price shock occurs,the inflation rate is affected ________.

Correct AnswerverifiedShow Answer

If expectations about inflation are adaptive,they are ________.

Correct AnswerverifiedShow Answer

On the modern Phillips curve,the initial impact of productivity improvements that lower the costs of production is shown by ________.

Correct AnswerverifiedShow Answer

Based on the data in this table, If the inflation rate in period zero had been 3 percent,then the accelerationist Phillips curve is ________.

Correct AnswerverifiedShow Answer

In the 1960s,advocates of the Phillips curve suggested ________.

Correct AnswerverifiedShow Answer

Which of the following is true in regards to Okun's law?

Correct AnswerverifiedShow Answer

When a price shock has occurred,inflation returns to its pre-shock rate ________.

Correct AnswerverifiedShow Answer

________ will cause a movement along the modern Phillips curve.

Correct AnswerverifiedShow Answer

According to the short-run aggregate supply curve,if output minus potential output equals zero,then ________.

Correct AnswerverifiedShow Answer

The idea behind the Phillips curve is that ________.

Correct AnswerverifiedShow Answer

Why are changes in the output gap larger than changes in the unemployment gap? Why is the relationship expressed in Okun's law not affected by inflation or expected inflation?

Correct AnswerverifiedCommon sense suggests that output and un...View AnswerShow Answer

Suppose the output gap is zero,and policy makers wish to reduce the inflation rate from 10 percent to 5 percent.Which of these policies seems best?

Correct AnswerverifiedShow Answer

If the short-run aggregate supply curve is shifting down repeatedly,it is rather likely that ________.

Correct AnswerverifiedShow Answer

In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy.Many refineries went offline disrupting oil refining and distribution.What do you think was a likely result?

Correct AnswerverifiedShow Answer

The Phillips curve was ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedCurrent inflation is 5 + 0.8 (20 - 20)+ ...View AnswerShow Answer

Which statement(s) is (are) consistent with a positive relationship between inflation and the output gap?

Correct AnswerverifiedShow Answer

What are price shocks? Why were they not included in the original formulation of the Phillips curve? Why were they added to the modern Phillips curve?

Correct AnswerverifiedIn the Phillips curve,inflation is deter...View AnswerShow Answer

According to Okun's law,an increase in which of the following is associated with an increase in unemployment?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Like any mechanic in the Bronx,most peop...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Common sense suggests that output and un...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Current inflation is 5 + 0.8 (20 - 20)+ ...
View Answer

Correct Answer
verified

Correct Answer
verified
In the Phillips curve,inflation is deter...
View Answer

Correct Answer
verified