Exam 33: The Trade-Off Between Inflation and Unemployment

Figure 33-6 ​ -If the economy in 34-6 (b) is experiencing an inflationary gap (point g), the economy's self-correcting process will move unemployment to ____ and inflation to ____.

If the income tax system were indexed, a person whose nominal income went up from $30,000 to $33,000 in a year when the price index rose by 10 percent would pay

Policymakers who believe that the costs of unemployment are very high will tend to favor which of the following during a recessionary gap?

If workers and firms forecast inflation accurately,

What are some of the possible ways in which we could reduce the natural rate of unemployment?

Most economists agree that the self-correcting mechanism works

Rational expectations are forecasts

Figure 33-6 ​ -The long-run Phillips curve in Figure 33-6 (b) would include which of the following points?

The Phillips curve assumes that shocks to the economy come from the demand side.

The short-run aggregate supply curve is upward sloping when inflation is underestimated.

Demand-side inflation is the rise in inflation caused by rapid growth of aggregate demand.

Figure 33-8 ​ -In Figure 33-8, which of the following movements illustrates the response of the economy to a stimulation of aggregate demand when workers systematically underpredict inflation?

The Phillips curve shows the relationship between

Most economists think that the economy's self-correcting mechanism is

One piece of evidence that business fluctuations are caused by demand-side changes would be that

If the aggregate supply curve shifts outward, then unemployment

Stimulating demand will improve the unemployment picture but

Keynesian economists generally agree that unemployment is more costly than inflation.

A scatter diagram of the position of the U.S.economy from 1972 through 2007 with the price level on the vertical axis and real GDP on the horizontal axis would show a movement generally toward the

Figure 33-8 ​ -In Figure 33-8, which of the following movements illustrates the response of the economy to an increase in aggregate demand when expectations are "rational"?