Exam 34: The Trade-Off Between Inflation and Unemployment

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well.How does economic theory explain this apparent violation of the Phillips curve model?

Fiscal and monetary policy can reduce unemployment with no negative side effects.

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

Figure 17-8 -In Figure 17-8, policy makers can choose any of the following points as sustainable inflation-unemployment combinations:

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

An increase in AD will trigger more inflation under which of the following conditions?

If the short-run Phillips curve has a very steep slope, the

The suggestion that the Fed concentrate only on reducing inflation is an attempt to

If unemployment and inflation always move in the same direction, then we can infer that business fluctuations are

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?

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

Opponents of indexing fear that it will lead to a(n)

Figure 17-6 -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 rational expectations are assumed, inflation can be reduced with no corresponding increase in unemployment.

Figure 17-5 -Over a five-year period, economists observed that the unemployment-inflation relationship appeared as in Figure 17-5.Economic theory would conclude that the period

The economy's self-correcting mechanism tends to push the unemployment rate back to a specific rate of unemployment.How?

Figure 17-8 -In Figure 17-8, which of the following movements would you associate with a "negative supply shock"?

The Keynesian view of the world is that the

Workers expecting inflation will expect wage increases to be built into their wage contracts.

Inflation can come from the demand side or from the supply side of the economy.