Exam 12: Unemployment and Inflation

An analysis of the American economy since 1960 shows that there is a stable relationship between inflation and unemployment

Phillips's research looked at British data on

In the expectations-augmented Phillips curve,? = ?e - 3(u - ).If ? = 0.06 when ?e = 0.06 and u = 0.04,then =

Ball found that an important factor affecting the sacrifice ratio is

In the expectations-augmented Phillips curve,? = ?e - 3(u - ).If ? = 0.09 when ?e = 0.06 and u = 0.06,then =

If you were president of the United States,what would you do to reduce the natural rate of unemployment? Propose at least three different methods.

The Lucas critique is an objection to the assumption that

A beneficial supply shock would cause

According to Okun's law,if full-employment output is $5,000 billion,then each percentage point of unemployment sustained for one year reduces output by

The relationship between inflation and unemployment is given by ? = ?e - 2(u - ). (a)Draw a diagram showing a long-run Phillips curve and two short-run Phillips curves that contain the following points: A: ? = .03,?e = .03 B: ? = .06,?e = .06 C: ? = .03,?e = .06 D: ? = .06,?e = .03 Label points A,B,C,and D in your diagram. The unemployment rate at point A equals .05. (b)What are the values of the natural rate of unemployment and the unemployment rates at points B,C,and D?

The Friedman-Phelps analysis shows that a negative relationship between inflation and unemployment holds

State and briefly explain whether or not the empirical evidence generally supports the belief that there is a fixed trade-off between unemployment and inflation,such that monetary policymakers can achieve the combination they prefer.

What is the Lucas critique,and why was it so important to macroeconomists in the 1970s?

You are given the following information about the economy. The natural rate of unemployment is 0.04,Okun's Law is that ,and the Phillips curve relationship is (a)What was the full-employment level of output in each year? (b)Calculate the growth rate of full-employment output each year. (c)If expected inflation was 0.04 for all four years,what was the inflation rate each year?

Based on the theory of the expectations-augmented Phillips curve,if the expected inflation rate is 2%,the short-run Phillips curve will

If a rapid disinflation has a lower sacrifice ratio than a slow disinflation,then reducing inflation is best accomplished by

Ball's research showed that the sacrifice ratio

When actual inflation is greater than expected inflation

In the extended classical model,an unanticipated increase in the money supply would cause output to ________ and the price level to ________ in the short run.

The main determinant of how quickly expected inflation adjusts to changes in monetary policy is