Exam 34: The Trade-Off between Inflation and Unemployment

Most economists today believe that the Phillips curve is

If the self-correcting mechanism operates quickly,

What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?

An inflationary gap will eliminate itself through a process of price increases.

Most economists and policy makers decided in 2007-2010 that reducing unemployment was the main national priority.

If aggregate demand had grown faster than it did from 2009 to 2010, then the U.S.economy would have experienced

If the U.S.economy had grown faster than it actually did from 2009 to 2010, the unemployment rate would have been higher.

Many economists think that, in the long run, the economy tends to move toward

Contractual provisions based on indexing are also called

The economy's self-correcting mechanism tends to push the unemployment rate back to a specific rate of unemployment.How?

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called

According to the theory of rational expectations, the government can influence output

Every year from 1954 to 1984, the U.S.economy was characterized by higher output and lower prices.

The Phillips curve explains the trade-off between inflation and unemployment.

Figure 17-3 -Given the situation in graph (1) in Figure 17-3, what can be expected to change in graph (1) when the economy's self-correcting mechanism operates?

The cure for inflation can come only from changes on the demand side.

If AD increases at a faster rate than AS, the result will be

In the 1960s and early 1970s, many economists and policy makers thought the Phillips curve was

Expansionary fiscal and monetary policy from 2008 to 2010, took the risk of being inflationary for the sake of avoiding additional unemployment.

An increase in aggregate demand will reduce the unemployment rate only if the ensuing inflation is anticipated.