Exam 9: An Introduction to the Short Run

Refer to the following figure when answering the following questions. Figure 9.5: U.S. Inflation 1960-2015 (Source: Bureau of Labor Statistics) -Consider Figure 9.5, which shows the annual inflation rate. According to the Phillips curve, the period from about 2003 to 2005 was a period of:

Defining u as the unemployment rate and as the natural rate of unemployment, Okun's law is given by the following equation:

According to the text, the slope of the Phillips curve in the United States is about ________. Thus, if the gap is 6 percent, the change in inflation would be ________ percent.

The Phillips curve in the text shows the ________ relationship between ________ and ________.

The Phillips curve shows the negative relationship between output fluctuations and the change in inflation.

Which of the following is NOT an example of a short-term macroeconomic shock?

Defining as current output, As potential output, and As short-run output, which of the following equations defines short-run output as the short-run fluctuation's share of potential GDP?

Suppose an economy exhibits a large unexpected decrease in productivity growth that lasts for a decade; however, monetary policymakers are slow to recognize that the change is to potential-not current-output, and they interpret the decrease in output as a recession that leads current to fall below potential output. In this scenario, policymakers believe that ________ pressures are building and incorrectly respond by ________ interest rates, sending the economy into a(n) ________ gap.

Refer to the following figure when answering the following questions. Figure 9.4: Phillips Curve -Consider the Phillips curve at in Figure 9.4. The economy is:

Refer to the following figure when answering the following questions. Figure 9.2: U.S. Output Fluctuations 1960-2015 -Consider Figure 9.2. The line represents short-run fluctuations, . Since 1960, the largest economic "boom" was in about ________ and the deepest recession was in about ________.

According to the text, which of the following can be used to approximate potential output? i. Assume a perfectly smooth trend is passing through the quarter-to-quarter movements in the real GDP. ii. Survey leading economists. iii. Gather current data from statistical agencies, such as the Bureau of Economic Analysis.

If current output is billion and potential output Billion, then the economy is in a ________ and Is about ________ percent.

Yale professor Ray Fair uses ________ to predict ________.

Refer to the following figure when answering the following questions. Figure 9.2: U.S. Output Fluctuations 1960-2015 -Consider Figure 9.2. In approximately what years did the U.S. economy experience its longest economic downturn, using the text's definition of a recessionary gap?

Which of the following is NOT an example of a short-term macroeconomic shock?

Figure 9.6: Economic Boom versus Recession -In Figure 9.6 above, area b represents an economic boom, and area a is a recession.

Defining u as the unemployment rate and as the natural rate of unemployment, Okun's law is given by .

Defining u as the unemployment rate and as the natural rate of unemployment, we can write Okun's law as the following equation:

Output fluctuations are defined as:

What does Okun's law state?