Exam 34: The Trade-Off Between Inflation and Unemployment

When inflation comes from the supply side, inflation and unemployment are positively correlated.Does this mean that monetary and fiscal policy makers can escape the trade-off between inflation and unemployment?

If nominal wages increase at the same rate as inflation, then the aggregate supply curve will be a horizontal line.

If policy makers do nothing in response to an inflationary gap, what will happen?

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

What is the effect of supply-side inflation on the short-run Phillips curve?

A non-policy reason for the reduction in the natural rate of unemployment is the

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

One reason why the Phillips curve "broke down" is

The economy's self-correcting mechanism ensures that neither recessionary nor inflationary gaps will be eliminated eventually.

The government can fight inflation by manipulating both aggregate demand and aggregate supply.

If aggregate demand grows faster than aggregate supply, the equilibrium price level will rise.

Figure 17-8 -In Figure 17-8, which of the following points cannot be observed in the long run?

If expectations are rational, the difference between the actual rate of inflation and the expected rate of inflation will be zero.

Figure 17-6 -Figure 17-6 (b) illustrates that

The aggregate supply curve slopes upward when the real wage falls initially as the price level rises.

The main reason why the economy's aggregate supply curve slopes upward is that

Which of the factors below contributed to the collapse of the Phillips curve in the 1970s?

Fighting inflation by slowing the growth of aggregate demand is

In December of 2007, with an unemployment rate of 5.0 percent, most economists believed this was above the natural rate.

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