Exam 8: Inflation: Its Causes and Cures

As the output ratio falls below 100%, unemployment

An accommodating policy response to a supply shock

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

The recession of the early 1990s produced a sacrifice ratio ________ that of the much larger recession of the 1980s.

The statement, "With a permanent adverse supply shock, the government should engage in extinguishing policy changes," is true only if

From a long-run equilibrium with x = p = pe = 10, a reduction in nominal GDP growth to 4 percent results in the long run in output of ________ and inflation of ________.

The European Monetary System

Suppose that members of Congress and the President believe that the natural rate of unemployment is 2% but in fact it is 6%, and employing fiscal policy they increase AD each time unemployment rises above 2%. The underestimation of the natural rate combined with adaptive expectations will

In the figure above, suppose that the economy traces the path E0 to E1 to E1'. We might conclude that ________ fiscal or monetary policy shifted the AD curve with price expectation first ________ then ________.

In ________ there were adverse supply shocks to the U.S. economy.

When the expected rate of inflation falls, the short-run Phillips Curve

Figure 8-6 -In the figure above, positive nominal GDP growth accompanied by higher inflationary expectations take us along path

The actual unemployment rate is most likely to rise when

If nominal GDP growth has accelerated permanently (assuming Y(N), is constant)

"pe = p - 1" is an expression of

Confronted with an adverse supply shock, an economy with rigid wages and prices would suffer

During 1981-82, the drop in inflation was ________ than the drop in nominal GDP growth, resulting in a ________ real GDP.

Crop failures generally produce ________ supply shocks in which the price level rises and then ________.

The flatter the SP curve

The SP curve shifts downward when