Exam 16: Inflation and Unemployment

Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course. He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following could have caused this phenomenon?

In the long run, sustained inflation is due to

Figure 16-6 -Refer to Figure 16-6. Suppose the economy was operating at point e in period 1. Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3. When workers and firms adjust their expectations in a higher price level and act on these expectations, the economy moves from a

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

The essential feature of a stagflation phase is

If a Phillips curve relationship between inflation and unemployment was completely valid at all times, would this be a good thing? Would this create any problems for policymakers? Explain.

A period marked by rising unemployment and high inflation is called a

As the duration of job search increases, there will likely be

From 1992 through 2000, the United States experienced

Which of the following statements is true of the U.S. experience with regards to the Phillips curve hypothesis? I. Values of inflation and unemployment rates during the 1960s generally conformed to the tradeoff implied by the Phillips curve. II. Annual observations of inflation and unemployment from 1961 to 2011 do not seem consistent with a Phillips curve. III. Annual observations of inflation and unemployment from 1961 to 2011 seem consistent with a Phillips curve.

Figure 16-3 Panel (a) Panel (b) Suppose the level of potential output (Y_P) is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a), the aggregate demand curve in Period 1 is AD₁. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b) point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a) corresponds to point G in Panel (b) and point d in Panel (a) corresponds to point H in Panel (b). -Refer to Figure 16-3. Suppose the economy is operating at point a. If policymakers Jundertake expansionary policies in period 1, what happens if there are lags in the application Jof policy?

In a recovery phase,

Which of the following statements is true?

Figure 16-3 Panel (a) Panel (b) Suppose the level of potential output (Y_P) is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a), the aggregate demand curve in Period 1 is AD₁. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b) point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a) corresponds to point G in Panel (b) and point d in Panel (a) corresponds to point H in Panel (b). -Refer to Figure 16-3. In the Phillips phase of the inflation-unemployment cycle,

The critical feature of the

Using the equation of exchange, the rate of money growth can be expressed as

A recovery phase if

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Jwas still in a recessionary gap left over from the 1990-1991 recession. Which of the Jfollowing best explains this move?

Figure 16-4 -Refer to Figure 16-4. The shifts of aggregate demand from points a to b to c to d are Jcharacteristic of which phase(s) of the inflation-unemployment relationship?

During a stagflation phase,