Exam 8: Inflation: Its Causes and Cures

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"Okun's Law" is the close relationship observed between a period's ________ unemployment rate and ________.

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The short-run equilibrium of inflation and real GDP

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COLAs ________ the probability that a permanent adverse supply shock will permanently increase an economy's ________.

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A beneficial supply shock will shift the short-run Phillips Curve

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

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Figure 8-2 Figure 8-2   -In the figure above, a policy that maintains nominal GDP growth in the advent of an adverse supply shock is a(n) -In the figure above, a policy that maintains nominal GDP growth in the advent of an adverse supply shock is a(n)

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"Okun's Law" is the ________ relation between the ________ and the difference between the actual unemployment rate and the average rate of unemployment.

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From a long-run equilibrium with p = pe = 0, suppose x rises to 6. If initially pe remains at zero and p rises to 4, Y becomes

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The growth of nominal GDP

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With COLAs in effect, if the Fed wishes to avoid a permanent acceleration of inflation after a permanent adverse supply shock, it

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Suppose we are initially at a long-run SP/LP equilibrium with x = p = pe = 4. Then an adverse supply shock adds 3 percentage points to the inflation necessary to produce each level of output. A "neutral" policy response ________ the level of nominal GDP growth so that inflation is ________ percent while (Y/YN) ________.

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Given an adverse supply shock, an "extinguishing policy response" will

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Which of the following "theories" of the formation of expectations are discussed by Gordon?

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Figure 8-2 Figure 8-2   -If there is a permanent adverse supply shock -If there is a permanent adverse supply shock

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A positive relationship between inflation and unemployment emerged in

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On the historical diagram with (Y/YN) on the horizontal axis, the disinflationary loop that began in 1981 contained an unusual movement almost straight downward during ________, attributable to ________.

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Backward-looking expectations could be classified as a ________ theory.

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The short-run SAS curve is positively sloped because as

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If actual real GDP (Q) is permanently greater than natural real GDP (YN)

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From an initial situation where P = 1.00 and Y = 100, 6 percent nominal GDP growth that causes P to go to 1.10 also causes Y to go to

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