Exam 33: The Trade-Off Between Inflation and Unemployment

Many economists think that, in the long run, the Phillips curve is

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

According to the Phillips curve, in the short run, if policymakers choose an expansionary policy to lower the rate of unemployment, the economy will experience an increase in inflation.

In the 1990s, the United States benefited from a series of favorable supply shocks. This caused a(n)

The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increases prices and decreases unemployment.

Figure 33-3 Given the situation in graph (1) in Figure 33-3, what can be expected to change in graph (1) when the economy's self-correcting mechanism operates?

A vocal minority of economists, believers in the theory of rational expectations, insist that

Which of the following observations concerning the Phillips curve is not true?

Which of the following is most likely to result in inflation?

A study of the U.S. price level and real GDP from 1972 to 2007 reveals a clear upward march toward higher prices and greater output. What explains this?

Define the following terms and explain their importance to the study of macroeconomics: a. Phillips curve b. rational expectations c. indexing d. stagflation

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

If fluctuations in economic activity come from the supply side, higher inflation is associated with

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

The theory of rational expectations says that

In the 1960s and early 1970s, many economists and policymakers thought the Phillips curve was

Which of the following could trigger supply-side inflation?

Rational expectations are forecasts

If the aggregate supply curve shifts outward, then unemployment