Exam 33: The Trade-Off Between Inflation and Unemployment

Rational expectations are forecasts that, although not necessarily correct, are the best that can be made given the available information.

Supply-side inflation is the rise in price level caused by slow growth (or decline) of aggregate supply.

Which of the following led to the collapse of the Phillips curve?

The Phillips curve is built on the assumption that business fluctuations are

If expectations are rational, inflation can be reduced without a period of high unemployment.

The Keynesian view of the world is that the

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

If strong fiscal policy stimulus is used to combat a recessionary gap, what will happen?

If you believe that expectations react slowly, you are likely

Inflationary gaps lead to rising unemployment and rising inflation.

If actual inflation differs from expected inflation, what is the slope of the Phillips curve?

Some of the promising approaches to reducing the natural rate of unemployment have to do with education, training, and job placement. What implementation problems do you anticipate?

Most economists think that, in the short run, there is

A vertical long-run Phillips curve is a vertical straight line at the natural rate of unemployment.

Figure 33-4 Which panel in Figure 33-4 shows what happened in 2007-2009?

Many economists think that, in the long run, the economy tends to move toward

Inflation can be caused by rapid growth of aggregate demand or by sluggish growth of aggregate supply.

An economy eliminates a recessionary gap by reducing wages and prices.

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 supply increases, then data would show

Some economists argue that there is no such thing as a short-run Phillips curve. Who are these economists and what is their argument?