Exam 8: Inflation: Its Causes and Cures

Suppose that the government enforced a law which required employers to adjust nominal wages monthly by the previous month's CPI. The short-run SAS curve would shift ________ and the SP curve would be ________.

Figure 8-4 -Inflation is a ________ increase in the price level and it can be produced if the AD curve shifts up ________.

The LP curve shifts when

If price controls are initiated, we would expect that

Which of the following are reasons why rational workers and firms may form their expectations by looking backward rather than forward?

The effects of a supply shock on employment can be moderated in the short-run by

Government price controls act as ________ supply shock, shifting SP ________.

In response to a rapid deceleration in the growth rate of nominal GDP in the early 1980s,

Suppose we are on the economy's SP curve for pe = 0. Currently x = p = 7. We cannot be in long-run equilibrium because this long-run equilibrium conditions is being violated:

With a beneficial supply shock, an extinguishing policy prevents ________, and allows ________.

Figure 8-4 -A rising nominal wage causes

Each SP curve is drawn assuming

The "indirect effect" of an adverse supply shock in the SP/LP model is

In 1991, the growth rate of nominal GDP was 2.97 percent and the growth rate of real GDP was -0.98 percent. The inflation rate was

The slope of the SP curve is determined in large part by the

"Supply inflation" is caused by

An increase in the rate of growth of nominal GNP

Figure 8-5 -In the figure above, from initial point A in the top diagram AD0 shifts to AD1, while the nominal wage remains constant. Short-run equilibrium occurs at point

A counterclockwise loop spiraling downward in the SP/LP diagram is the dynamic process typical of ________ policy with inflationary expectations that ________ adjust.

Which of the following does NOT affect nominal GDP?