Question 1

Stagflation consists of

Accepted Answer

A)  high inflation and low unemployment. 
B)  low inflation and high unemployment. 
C)  high inflation and high unemployment. 
D)  high unemployment and an economy in a deep recession. 
E)  none of the above 
A)  high inflation and low unemployment. 
B)  low inflation and high unemployment. 
C)  high inflation and high unemployment. 
D)  high unemployment and an economy in a deep recession. 
E)  none of the above

Question 2

The original Phillips curve depicted the relationship between

Accepted Answer

A)  price inflation and unemployment. 
B)  price inflation and employment. 
C)  wage inflation and unemployment. 
D)  wage inflation and employment. 
A)  price inflation and unemployment. 
B)  price inflation and employment. 
C)  wage inflation and unemployment. 
D)  wage inflation and employment.

Question 3

The Friedman natural rate theory implies that there is a tradeoff between inflation and unemployment in

Accepted Answer

A)  neither the short run nor the long run. 
B)  both the short run and the long run. 
C)  the short run, but not in the long run. 
D)  the long run, but not in the short run. 
A)  neither the short run nor the long run. 
B)  both the short run and the long run. 
C)  the short run, but not in the long run. 
D)  the long run, but not in the short run.

Question 4

For the period 1961 to 1969,the Phillips curve for the United States displayed the same shape that A.W.Phillips found for the United Kingdom for the period 1861 to 1913---it was

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping.

Question 5

Starting from long-run equilibrium,if the public anticipates that policymakers will increase aggregate demand by less than policymakers do increase aggregate demand,and if the short-run aggregate supply curve fully adjusts to the (incorrectly)anticipated increase in aggregate demand,then Real GDP will __________ and the price level will __________.

Accepted Answer

A)  rise; rise 
B)  decline; fall 
C)  stay constant; rise 
D)  decline; rise 
A)  rise; rise 
B)  decline; fall 
C)  stay constant; rise 
D)  decline; rise

Question 6

The expected inflation rate is equal to the actual inflation rate.According to the (Friedman)natural rate theory,the economy is

Accepted Answer

A)  in a recessionary gap. 
B)  in an inflationary gap. 
C)  at a point on the short-run Phillips curve, but not on the long-run Phillips curve. 
D)  biased toward producing a higher percentage of services than goods. 
E)  producing Natural Real GDP. 
A)  in a recessionary gap. 
B)  in an inflationary gap. 
C)  at a point on the short-run Phillips curve, but not on the long-run Phillips curve. 
D)  biased toward producing a higher percentage of services than goods. 
E)  producing Natural Real GDP.

Exam 16: Expectations Theory and the Economy

Stagflation consists of

The original Phillips curve depicted the relationship between

The Friedman natural rate theory implies that there is a tradeoff between inflation and unemployment in

For the period 1961 to 1969,the Phillips curve for the United States displayed the same shape that A.W.Phillips found for the United Kingdom for the period 1861 to 1913---it was

The expected inflation rate is equal to the actual inflation rate.According to the (Friedman)natural rate theory,the economy is

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