Exam 14: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

If the hypothesis of hysteresis is correct and output is lost even after a period of disinflation, the sacrifice ratio for an economy will:

The sacrifice ratio measures the:

According to the imperfect-information model, when the price level rises by the amount the producer expected it to rise, the producer:

How is demand-pull inflation different from cost-push inflation?

Illustrate the short-run and long-run impact of an unexpected monetary contraction using both the AD-AS model and the Phillips curve. Assume the economy starts at full employment.

The most prominent feature of the U.S. economy in the 1970s was:

A recession may alter an economy's natural rate of unemployment in all of the following ways except by:

The classical dichotomy breaks down for a Phillips curve, which shows the relationship between a nominal variable, ______, and a real variable, ______.

Use the following to answer questions : Exhibit: AD-AS Shifts -(Exhibit: Short-Run Phillips Curve) As the short-run Phillips curve shifts from A to B to C to D:

The short-run aggregate supply curve is drawn for a given:

The relationship between short-run aggregate supply curves and Phillips curves is that there:

The Phillips curve shows a ______ relationship between inflation and unemployment, and the short-run aggregate supply curve shows a ______ relationship between the price level and output.

The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation:

In the 1960s, in the United States:

Assume that people form expectations rationally and that the sticky-price model describes the aggregate supply curve in the economy. For each of the following scenarios explain whether or not monetary policy can have real effects on the economy. a. The central bank determines monetary policy using the same informati on available to all firms and at the same time firms are setting prices, so that both firms and policymakers have all of the same information. b. The central bank determines monetary policy after firms have set prices using information not avalable at the time prices were set.

The imperfect-information model assumes that producers find it difficult to distinguish between changes in:

a. What is the sacrifice ratio? b. What is one factor that could possibly lower the sacrifice ratio for an economy? c. What is one factor that could possibly increase the sacrifice ratio for an economy?

What is meant by the "cold turkey solution" to inflation?

Each of the two models of short-run aggregate supply is based on some market imperfection. In the imperfect-information model, the imperfection is that:

Use the following to answer questions : Exhibit: AD-AS Shifts -(Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to $\bar { Y }$ and the price level equal to P₁, if there is an unexpected monetary contraction that shifts aggregate demand from AD₁ to AD₃, then the short-run nonneutrality of money is represented by the movement from: