Exam 12: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

When adaptive expectations are used to model inflation expectations in the Phillips curve, then the natural rate of unemployment is called the rate of unemployment.

The sacrifice ratio measures the:

According to the natural-rate hypothesis, the levels of output and unemployment depend on:

The Phillips curve shows a relationship between inflation and unemployment, and the short-run aggregate supply curve shows a relationship between the price level and output.

In the 1960s, in the United States:

An economy must sacrifice 12 percent of GDP to reduce inflation. Which of the following plans represents the "cold turkey" solution to inflation?

Each of the following conditions will tend to reduce the sacrifice ratio except when:

In the sticky-price model, the relationship between output and the price level depends on:

Assume that an economy has the Phillips curve π = π -1 - 0)5(u - 0.06). How many percentage point-years of cyclical Unemployment are needed to reduce inflation by 5 percentage points?

In the sticky-price model, if no firms have flexible prices, the short-run aggregate supply schedule will:

The Phillips curve expresses a short-run link:

According to the sticky-price model, deviations of output from the natural level are deviations of the price level from the expected price level.

The short-run Phillips curve:

The imperfect-information model bases the difference in the short-run and long-run aggregate supply curve on:

The assumption of adaptive expectations for inflation means that people will form their expectations of inflation by:

According to the sticky-price model, other things being equal, the greater the proportion, s, of firms that follow the sticky-price rule, the the in output in response to an unexpected price increase.

A recession may alter an economy's natural rate of unemployment in all of the following ways except by:

All of the following are requirements for reducing inflation without causing a recession except:

Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

Cost-push inflation is the result of: