Question 1

Stagflation is the simultaneous occurrence of substantial unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 2

Time lags can cause economic policy to affect the economy after the underlying problems have changed.

Accepted Answer

A) True 
 B)False

Question 3

Fine-tuning involves the adoption of fixed policy rules regardless of the economic situation.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true about the U.S.economy?

Accepted Answer

A) It has been able to do away with the business cycle. 
B) It still experiences periods of inflation and unemployment. 
C) It had greater economic problems than other Western countries in the 1990s. 
D) It has experienced 30 years of outright recession in the last 50 years. 
A) It has been able to do away with the business cycle. 
B) It still experiences periods of inflation and unemployment. 
C) It had greater economic problems than other Western countries in the 1990s. 
D) It has experienced 30 years of outright recession in the last 50 years.

Question 5

An inflationary GDP gap is equal to the

Accepted Answer

A) Recessionary GDP gap. 
B) Difference between equilibrium GDP and full-employment GDP. 
C) Difference between potential GDP and full-employment GDP. 
D) Increase in the price level caused by the inflation. 
A) Recessionary GDP gap. 
B) Difference between equilibrium GDP and full-employment GDP. 
C) Difference between potential GDP and full-employment GDP. 
D) Increase in the price level caused by the inflation.

Question 6

Which of the following is true about stagflation?

Accepted Answer

A) It can be corrected by increases in aggregate supply. 
B) It results in a lower value of the misery index. 
C) It can be corrected by demand-side policies. 
D) It causes higher prices and lower unemployment. 
A) It can be corrected by increases in aggregate supply. 
B) It results in a lower value of the misery index. 
C) It can be corrected by demand-side policies. 
D) It causes higher prices and lower unemployment.

Exam 18: Theory Versus Reality

Stagflation is the simultaneous occurrence of substantial unemployment and inflation.

Time lags can cause economic policy to affect the economy after the underlying problems have changed.

Fine-tuning involves the adoption of fixed policy rules regardless of the economic situation.

Which of the following is true about the U.S.economy?

An inflationary GDP gap is equal to the

Which of the following is true about stagflation?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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