Exam 33: The Trade-Off Between Inflation and Unemployment

What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?

The U.S. economy in the 1990s benefited from an aggregate supply curve shifting outward.

If AD increases at a faster rate than AS, the result will be

Policymakers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

In the 1990s, the rising value of the U.S. dollar made imported goods cheaper and this shifted the

If workers expect inflation, and negotiate wage increases that exactly match price increases, the result is a

Demand-side inflation is usually accompanied by increasing real GDP, while supply-side inflation is usually accompanied by falling real GDP.

One reason that the Phillips curve "broke down" is that it

The short-run aggregate supply curve is vertical when inflation is predicted accurately.

In what way do policymakers have to face a trade-off between inflation and unemployment?

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the most rapid inflation occurs when

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

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

The origin of the Phillips curve is the idea that an increase in

During the 1960s and early 1970s, economists believed that the Phillips curve indicated

If workers can see inflation coming, and if they receive compensation for it, then inflation does not erode real wages.

The cost of reducing unemployment more rapidly by expansionary fiscal and monetary policies is a permanently higher inflation rate.

If AS increases at a faster rate than AD, the result will be

All points on the long-run Phillips curve that are sustainable in the long run due to economy's self-correcting mechanism correspond to the

Figure 33-8 In Figure 33-8, which of the following movements reflects the closing of a recessionary gap through the economy's self-correcting mechanism?