Question 1

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.

Accepted Answer

The answer of State and briefly explain whether or not...

Question 2

Milton Friedman and Edmund Phelps questioned

Accepted Answer

A) the use of expectations in the Phillips curve. 
B) the stability of the relationship between inflation and unemployment. 
C) the existence of a natural rate of unemployment. 
D) the existence of a full-employment level of output.

Question 3

Why did the government use expansionary monetary policies in the late 1970s,and what was the principal negative macroeconomic effect of these policies?

Accepted Answer

The answer of Why did the government use expansionary monetary...

Question 4

In the expectations-augmented Phillips curve,π = πe - 3(u - 0.05).When π = 0.03 and πe = 0.06,the unemployment rate is

Accepted Answer

A) 0)04. 
B) 0)05. 
C) 0)06. 
D) 0)07.

Question 5

When actual inflation is greater than expected inflation

Accepted Answer

A) the natural rate of unemployment rises, according to Phillips-curve analysis. 
B) cyclical unemployment rises, according to Phillips-curve analysis. 
C) there are transfers from borrowers to lenders. 
D) there are transfers from lenders to borrowers.

Question 6

The short-run Phillips curve is the relation between inflation and unemployment that holds for a given natural rate of unemployment and a

Accepted Answer

A) given rate of inflation. 
B) given expected rate of inflation. 
C) given level of unemployment. 
D) given expected level of unemployment.

Question 7

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

Accepted Answer

A) have a kink at an inflation rate of 2%. 
B) be the same as the long-run Phillips curve. 
C) intersect the long-run Phillips curve at the natural unemployment rate, when the inflation rate is 2%. 
D) be horizontal at an expected inflation rate of 2%.

Question 8

You are given the following information about the economy. The natural rate of unemployment is 0.04,Okun's Law is that ( $ \bar{\gamma} $ - Y)/ $ \bar{\gamma} $ = 2(u - $\bar u $ ),and the Phillips curve relationship is π = π^e - 2 (u - 0.04). (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?

Accepted Answer

The answer of You are given the following information about...

Question 9

Ball found that an important factor affecting the sacrifice ratio is

Accepted Answer

A) the flexibility of the labor market. 
B) the shape of the yield curve. 
C) the real interest rate. 
D) the tightness of fiscal policy.

Question 10

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

Accepted Answer

The answer of What is the Lucas critique,and why was...

Question 11

Ball's research on disinflation across different countries found that

Accepted Answer

A) costs of disinflation were smaller for rapid disinflation than for gradual disinflation. 
B) costs of disinflation were larger for rapid disinflation than for gradual disinflation. 
C) costs of disinflation were about the same for both rapid and gradual disinflation. 
D) costs of disinflation were smaller when the central bank had a strong inflation-fighting reputation.

Question 12

Classical macroeconomists argue that the short-run Phillips curve ________ represent a usable trade-off for policymakers because ________.

Accepted Answer

A) does; people have rational expectations 
B) does; people do not have rational expectations 
C) does not; people do not have rational expectations 
D) does not; people have rational expectations

Question 13

Inflation expectations in the United States generally

Accepted Answer

A) fell from 1971 to 1976, rose from 1977 to 1985, then fell from 1985 to 1995, and have been stable since then. 
B) fell from 1971 to 1985, then rose from 1985 to 2000, and have been stable since then. 
C) rose from 1971 to 1987, then fell from 1987 to 2006. 
D) rose from 1971 to 1982, then fell from 1982 to 2000, and have been stable since then.

Question 14

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.

Accepted Answer

A) increase; increase 
B) decrease; remain unchanged 
C) remain unchanged; increase 
D) decrease; decrease

Question 15

The Lucas critique is an objection to the assumption that

Accepted Answer

A) inflation is always and everywhere a monetary phenomenon. 
B) there is a negative relationship between inflation and unemployment. 
C) historical relationships between macroeconomic variables will continue to hold after new policies are in place. 
D) people form expectations rationally.

Question 16

In the expectations-augmented Phillips curve,π = πe - 3(u - 0.06).When π = 0.06 and πe = 0.03,the unemployment rate is

Accepted Answer

A) 0)04. 
B) 0)05. 
C) 0)06. 
D) 0)07.

Question 17

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

Accepted Answer

A) only in the short run. 
B) only in the long run. 
C) in neither the short run nor the long run. 
D) in both the short run and the long run.

Question 18

The amount of output lost when the inflation rate is reduced by one percentage point is called

Accepted Answer

A) Okun's law. 
B) the sacrifice ratio. 
C) the Solow residual. 
D) Planck's constant.

Question 19

Shoe leather costs are

Accepted Answer

A) the costs in time and effort incurred by people and firms who are trying to minimize their holdings of cash because of inflation. 
B) the costs of changing prices, such as printing and mailing catalogues. 
C) the costs of the redistribution of wealth between lenders and borrowers. 
D) the costs associated with the confusion of prices as signals.

Question 20

The bulk of the decline in the natural rate of unemployment from 1980 to 2000 is because of

Accepted Answer

A) a decline in the inflation rate. 
B) a decline in the share of young workers in the labor force. 
C) increased competition from foreign workers. 
D) the depreciation of the dollar relative to foreign currencies.

Exam 12: Unemployment and Inflation

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.

Milton Friedman and Edmund Phelps questioned

Why did the government use expansionary monetary policies in the late 1970s,and what was the principal negative macroeconomic effect of these policies?

In the expectations-augmented Phillips curve,π = π^e - 3(u - 0.05) .When π = 0.03 and π^e = 0.06,the unemployment rate is

When actual inflation is greater than expected inflation

The short-run Phillips curve is the relation between inflation and unemployment that holds for a given natural rate of unemployment and a

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

Ball found that an important factor affecting the sacrifice ratio is

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

Ball's research on disinflation across different countries found that

Classical macroeconomists argue that the short-run Phillips curve represent a usable trade-off for policymakers because .

Inflation expectations in the United States generally

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 Lucas critique is an objection to the assumption that

In the expectations-augmented Phillips curve,π = π^e - 3(u - 0.06) .When π = 0.06 and π^e = 0.03,the unemployment rate is

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

The amount of output lost when the inflation rate is reduced by one percentage point is called

Shoe leather costs are

The bulk of the decline in the natural rate of unemployment from 1980 to 2000 is because of

Exam 12: Unemployment and Inflation

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.

Milton Friedman and Edmund Phelps questioned

Why did the government use expansionary monetary policies in the late 1970s,and what was the principal negative macroeconomic effect of these policies?

In the expectations-augmented Phillips curve,π = πe - 3(u - 0.05) .When π = 0.03 and πe = 0.06,the unemployment rate is

When actual inflation is greater than expected inflation

The short-run Phillips curve is the relation between inflation and unemployment that holds for a given natural rate of unemployment and a

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

Ball found that an important factor affecting the sacrifice ratio is

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

Ball's research on disinflation across different countries found that

Classical macroeconomists argue that the short-run Phillips curve ________ represent a usable trade-off for policymakers because ________.

Inflation expectations in the United States generally

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 Lucas critique is an objection to the assumption that

In the expectations-augmented Phillips curve,π = πe - 3(u - 0.06) .When π = 0.06 and πe = 0.03,the unemployment rate is

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

The amount of output lost when the inflation rate is reduced by one percentage point is called

Shoe leather costs are

The bulk of the decline in the natural rate of unemployment from 1980 to 2000 is because of

In the expectations-augmented Phillips curve,π = π^e - 3(u - 0.05) .When π = 0.03 and π^e = 0.06,the unemployment rate is

Classical macroeconomists argue that the short-run Phillips curve represent a usable trade-off for policymakers because .

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.

In the expectations-augmented Phillips curve,π = π^e - 3(u - 0.06) .When π = 0.06 and π^e = 0.03,the unemployment rate is