Exam 8: Inflation: Its Causes and Cures

Figure 8-4 -The aggravation of inflation and unemployment as a result of a supply shock

The European Monetary System

Can "stagflation" occur as part of a business cycle triggered by a change in nominal GDP growth?

Which of the following represent supply shocks:

With a permanent acceleration in nominal GDP growth, an "adjustment loop" leaves us in the end with ________ output and ________ inflation.

The natural unemployment rate fell in the 1990s in part because of ________.

An acceleration of nominal GDP growth from, say 4% to 6% will

If the government raises the growth of nominal GDP in response to a supply shock

For countries with high inflation rates, joining the European Monetary System meant

Stagflation may be explained by

Figure 8-4 -In Chapter 8, the SAS curve is upward-sloping. One assumption that justifies this is that

Assume adaptive expectations. Compared to a simple one-period lag, if the last five periods' inflation rates are averaged to arrive at currently expected inflation, we have ________ disinflationary loops and ________ recessions accompanying disinflationary policy

For real output to remain constant

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

From a long-run equilibrium with p = pe = 0, suppose x rises permanently to 8 and pe never rises from zero. The economy will come to rest

Suppose expected inflation is fixed at zero and we are on the SP curve with p = 2 and Y = 104. If nominal GDP rises (again) by 6 percent

Figure 8-4 -Employing Figure above in the time periods t0 to t1, and t4 to t5 real GNP is ________; from t1 to t2, t3 to t4, and beyond t5 real GNP is ________.

Under the European Monetary System, a country's export prices

The imposition of price controls can be expected to

Which of the following countries had the lowest inflation rate from 1980 to the early 1990s?