Exam 26: Bringing in the Supply Side: Unemployment and Inflation

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

The economy does have a self-correcting mechanism that tends to eliminate either unemployment or inflation and tends to act slowly and unevenly.

An economic boom that creates an inflationary gap is usually followed later by

From 2005 to 2006, the U.S. economy experienced significant inflation because the aggregate demand curve shifted outward more than the aggregate supply curve shifted outward.

The U.S. economy in the mid-2000s did not experience stagflation because

The aggregate supply curve normally

When economists refer to the economy's self-correcting mechanism, they are referring to the fact that the

An increase in the nominal wage shifts the aggregate supply inward.

The case for government stabilization policy is made more compelling if the

Improvements in productivity shift the aggregate supply curve outward.

Figure 10-5   In Figure 10-5, which graph best illustrates the situation of an economy reacting to a recessionary gap by reducing resource cost levels?

Productivity is the amount of output produced by a unit of input.

The aggregate demand and aggregate supply curve intersect

Figure 10-5   In Figure 10-5, which graph best illustrates the situation of an economy with high unemployment that experiences an increase in investment spending?

Figure 10-8 Figure 10-8 illustrates a period of

How is it possible for the economy to have a recessionary gap?

The main reason that firms adjust their output when the price level changes is that

When the expenditure schedule is too high, the result is a(n)

The fact that severe fluctuations in inflation and unemployment are socially undesirable helps make the case for

A recession can be expected to reduce inflation in the economy if the recession is caused by a(n)