Deck 31: Macro Inflation and Unemployment

Question 1

Each point on a Phillips curve is a different combination of

A)aggregate output and the unemployment rate.
B)the inflation rate and the unemployment rate.
C)aggregate output and the inflation rate.
D)saving and disposable income.

Answer 1

B

Question 2

Figure 16-1

Refer to Figure 16-1.Consider point B where unemployment is relatively high and inflation
Is relatively low.In order to move up the curve toward point A, what fiscal policy measures
Should the policymakers undertake?

A)decrease taxes and government spending
B)increase taxes and government spending
C)increase taxes and decrease government spending
D)decrease taxes and increase government spending

Answer 2

D

Question 3

Which of the following is a cost of unemployment?
I.output foregone
II.unemployment compensation that must be paid
III.rising inflation that erodes the value of money

A)I, II, and III
B)I and II
C)I and III
D)II and III

Answer 3

B

Question 4

The notion that there is a tradeoff between inflation and unemployment is expressed as a

A)Phillips curve.
B)Keynes curve.
C)Schumpeter curve.
D)Friedman curve.

Question 5

Which of the following statements is true of the U.S.experience with regards to the Phillips curve hypothesis?
I.Values of inflation and unemployment rates during the 1960s are atypical in that they generally conformed to the tradeoff implied by the Phillips curve.
II.Annual observations of inflation and unemployment from 1961 to 2008 do not
Seem consistent with a Phillips curve.
III.Annual observations of inflation and unemployment from 1961 to 2008 seem consistent
With a Phillips curve.

A)I only
B)II only
C)I and II only
D)III only

Question 6

Figure 16-2

Refer to Figure 16-2.Consider an economy that experiences a recessionary gap.Which of the points in the diagram is consistent with this situation?

A)point X
B)point Y
C)either point X or point Y
D)neither of the two points

Question 7

Suppose an economy is operating with a contractionary gap.In this case, policymakers Would seek to move the economy

A)back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.
B)up the Phillips curve, trading a reduction in inflation for an increase in unemployment.
C)back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.
D)up the Phillips curve, trading a reduction in unemployment for an increase in inflation.

Question 8

Which of the following economists came up with a theory regarding the tradeoff between
Unemployment and inflation?

A)Almarin Phillips
B)John Maynard Keynes
C)Joseph Schumpeter
D)Milton Friedman

Question 9

Along an actual (observed)Phillips curve,

A)aggregate output varies inversely with the unemployment rate.
B)aggregate output directly inversely with the inflation rate.
C)the inflation rate varies inversely with the unemployment rate.
D)the inflation rate varies directly with the unemployment rate.

Question 10

Which of the following characterizes the relationship between inflation and unemployment in the United States?
I.There have been periods in which a clear tradeoff between inflation and unemployment
Seem to exist.
II.There have been periods in which inflation and unemployment rose together.
III.There have been periods in which inflation and unemployment fell together.

A)I, II, and III
B)I and II
C)I and III
D)I only

Question 11

Suppose that an economy experiences an increase in the unemployment rate and a decline in The inflation rate simultaneously.This situation would be consistent with a movement along a

A)vertical Phillips curve.
B)horizontal Phillips curve.
C)positively sloped Phillips curve.
D)negatively sloped Phillips curve.

Question 12

Suppose an economy is operating with an inflationary gap.In this case, policymakers would Seek to move the economy

A)back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.
B)up the Phillips curve, trading a reduction in unemployment for an increase in inflation.
C)back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.
D)up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

Question 13

Suppose an economy is operating with a contractionary gap.In this case, policymakers would seek to move the economy

A)back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.
B)up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.
C)back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.
D)up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.

Question 14

A Phillips curve implies

A)a negative relationship between consumption and saving.
B)a positive relationship between inflation and prices.
C)a negative relationship between inflation and unemployment.
D)a positive relationship between consumption expenditure and inflation.

Question 15

Figure 16-2

Refer to Figure 16-2.Consider an economy that experiences an inflationary gap.Which of the points in the diagram is consistent with this situation?

A)point X
B)point Y
C)either point X or point Y
D)neither of the two points

Question 16

Figure 16-1

Refer to Figure 16-1.Moving from B to A shows a tradeoff of

A)more unemployment for less inflation.
B)less unemployment for more inflation.
C)a fixed amount of unemployment for more inflation.
D)less unemployment for less inflation.

Question 17

From 1992 through 2000, the United States experienced

A)rising unemployment and rising inflation.
B)falling unemployment and an inflation rate that was about 2% or less.
C)falling unemployment and an inflation rate that increased moderately over the period.
D)rising unemployment and a decreasing inflation rate.

Question 18

The inflation rate can be measured as

A)the change in the average price level from one year to the next.
B)the change in the implicit price deflator from one year to the next.
C)the annual percentage change in the implicit price deflator from one year to the next.
D)the change in the consumer price index from one year to the next.

Question 19

Figure 16-1

Refer to Figure 16-1.Consider point A where inflation is relatively high and unemployment
Is relatively low.In order to move down the curve toward point B, what fiscal policy measures should the policymakers undertake?

A)decrease taxes and government spending
B)increase taxes and government spending
C)increase taxes and decrease government spending
D)decrease taxes and increase government spending

Question 20

Suppose an economy is operating with an inflationary gap.In this case, policymakers would Seek to move the economy

A)back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.
B)up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.
C)back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.
D)up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.

Question 21

In the three phases of the inflation-unemployment cycle, a period characterized by declining Inflation and unemployment is called the

A)economic growth phase.
B)stagflation phase.
C)recovery phase.
D)Phillips phase.

Question 22

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium below full employment, then the primary economic problem would be

A)unemployment.
B)deflation.
C)financing the government budget deficit.
D)financing unemployment compensation.

Question 23

Figure 16-3

Refer to Figure 16-3.Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course.He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following movements represents the statement?

A)the movement from A to B
B)the movement from B to C
C)the movement from C to D
D)the movement from C to B

Question 24

In the three phases of the inflation-unemployment cycle, during the Phillips phase,

A)inflation and unemployment both increase.
B)inflation and unemployment stay the same.
C)inflation and unemployment both decrease.
D)unemployment decreases and inflation increases.

Question 25

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

A)excessive bank lending.
B)potential crises in financial markets.
C)inflation.
D)excess aggregate demand.

Question 26

What is the inflation-unemployment cycle?

A)It refers to cyclical pattern of inflation and unemployment suggested by inflation and unemployment data for the U.S.between 1960 and 2000.
B)It refers to a recurring tradeoff between inflation and unemployment suggested by inflation and unemployment data for the U.S.between 1960 and 2000.
C)It refers to the cyclical pattern of expansions and contractions in the level of economic activity for the U.S.between 1960 and 2000.
D)It refers to the cyclical pattern of inflation-productivity and deflation-unemployment experienced by most industrialized countries.

Question 27

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap.The Nixon administration rationalized that through a combination of a government spending cuts and a decrease in the money growth rate, it could successfully

A)reduce inflation, which would then cause unemployment to fall.
B)get the economy to slide down along the Phillips curve, thereby trading off a reduction in inflation for an increase in unemployment.
C)halt any increases in the price level by increasing productivity which would then return the economy to its potential output.
D)get the economy to slide up along the Phillips curve, thereby trading an increase in unemployment for deflation.

Question 28

Figure 16-3

Refer to Figure 16-3.Which of the following represents the stagflation phase?

A)the movement from A to B
B)the movement from B to C
C)the movement from C to D
D)the movement from A to C

Question 29

What are the three phases of the inflation-unemployment cycle?

A)the expansionary phase, the full-employment phase, and the contractionary phase
B)the Phillips phase, the stagflation phase, and the growth phase
C)the Phillips phase, the stagflation phase, and the recovery phase
D)the expansionary phase, the stagflation phase, and the recovery phase

Question 30

Figure 16-3

Refer to Figure 16-3.Which of the following movements represents the recovery phase?

A)the movement from A to B
B)the movement from B to C
C)the movement from C to D
D)the movement from C to B

Question 31

Figure 16-3

Refer to Figure 16-3.Which of the following movements represents the Phillips phase?

A)the movement from A to B
B)the movement from B to C
C)the movement from C to D
D)the movement from B to A

Question 32

Rising inflation means

A)that the price level is increasing by a given percentage rate.
B)that the prices of all goods and services increase from year to year.
C)that the price level is rising at an increasing rate.
D)that the price level is rising at a variable rate.

Question 33

In the three phases of the inflation-unemployment cycle, a period marked by rising unemployment and high inflation is called the

A)inflationary phase.
B)stagflation phase.
C)Phillips phase.
D)recovery phase.

Question 34

In the three phases of the inflation-unemployment cycle, during the stagflation phase,

A)inflation and unemployment both increase.
B)inflation and unemployment stay the same.
C)inflation and unemployment both decrease.
D)unemployment decreases and inflation increases.

Question 35

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap.As suggested by the Phillips curve hypothesis, policy makers instituted a combination of contractionary fiscal and monetary policies to eliminate the output gap.Which of the following occurred as a result?

A)The policies moved the economy from the stagflation phase to the Phillips phase.
B)The policies successfully reduced inflation and increased unemployment.
C)The outcome suggested by the Phillips curve did not occur, instead unemployment rose with virtually no change in inflation.
D)The policies moved the economy from a recovery phase to a stagflation phase.

Question 36

Figure 16-3


-Refer to Figure 16-3.The figure shows the three phases of the inflation-unemployment Cycle.What are these three phases, moving clockwise from point A?

A)Phillips phase, recovery phase, stagflation phase
B)recovery phase, stagflation phase, Phillips phase
C)Phillips phase, stagflation phase, recovery phase
D)stagflation phase, recovery phase, Phillips phase

Question 37

In the three phases of the inflation-unemployment cycle, during the recovery phase,

A)inflation and unemployment both increase.
B)inflation and unemployment stay the same.
C)inflation and unemployment both decrease.
D)unemployment decreases and inflation increases.

Question 38

Stagflation implies that

A)policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation.
B)a tradeoff between inflation and unemployment may not always exist.
C)any relationship between the inflation and unemployment was purely random.
D)the relationship predicted by the Phillips curve is stable.

Question 39

Figure 16-3

Refer to Figure 16-3.Consider the following statement: "The nation's inflation rate rose to a record high last month, the government reported yesterday.The consumer price index jumped 0.3% in January.Coupled with the announcement earlier this month that unemployment had risen by 0.5 percentage points, the reports suggested that the first month of President Nixon's second term had gotten off to a rocky start." Which of the following movements represents the statement?

A)the movement from A to B
B)the movement from B to C
C)the movement from C to D
D)the movement from C to B

Question 40

Which of the following statements is true of the U.S.experience with regards to the Phillips curve hypothesis?
I.Annual observations of inflation and unemployment from 1961 to 2008 seem consistent with a Phillips curve.
II.A Phillips curve relationship best fits observations of inflation and unemployment in the 1960s.
III.The Phillips curve relationship in the inflation and unemployment data began to disintegrate in the 1970s.

A)I only
B)II only
C)III only
D)II and III only

Question 41

The critical feature of the _______ phase is a change in _______.

A)Phillips; unemployment and inflation in the same direction
B)recovery; inflation and unemployment in the opposite direction
C)stagflation; nominal wages and expectations
D)expansion; the rate of change of real wages and real GDP

Question 42

Figure 16-6

Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.What happens when workers and firms adjust their expectations in a higher price level and act on these expectations?

A)The aggregate demand curve shifts to the left until it intersects the long-run aggregate supply (LRAS)curve.
B)The short-run aggregate supply (SRAS)curve shifts to the right.
C)The SRAS curve shifts to the left.
D)Both the LRAS and the SRAS curves shift to the right.

Question 43

The Phillips phase of the inflation-unemployment cycle emerges because

A)prices and wages are flexible.
B)nominal wages and prices fall.
C)of unanticipated increases in the price level produced by increases in aggregate demand.
D)people are reluctant to spend despite expansionary policies pursued by policymakers.

Question 44

Figure 16-7


-Refer to Figure 16-7.Suppose initially the economy was at point 1 and as a result of Stabilization policies, it is now at point 3.Consequently, here will be pressure for

A)workers to settle for lower nominal wages.
B)firms to decrease prices.
C)workers and firms to incorporate price increases into their expectations.
D)the Fed to buy bonds in the open market.

Question 45

Falling inflation means

A)that the price level is falling from one period to the next.
B)that the price level is falling at a decreasing rate.
C)that the price level is falling at an increasing rate.
D)that the price level is increasing at a decreasing rate.

Question 46

Figure 16-7

Refer to Figure 16-7.At point 4, the economy is experiencing

A)an inflationary gap.
B)a recessionary gap.
C)long-run equilibrium.
D)a recovery.

Question 47

In the short run, if the economy is in the Phillips phase of the inflation-unemployment cycle, An increase in aggregate demand will generate

A)an increase in the price level and an increase in the unemployment rate.
B)an increase in the price level and a decrease in the unemployment rate.
C)an increase in the price level and no change in the unemployment rate.
D)a decrease in the price level and an increase in the unemployment rate.

Question 48

Figure 16-5


-Refer to Figure 16-5.The shifts of aggregate demand from points a to b to c to d are Characteristic of which phase(s)of the inflation-unemployment cycle?

A)the Phillips phase to the stagflation phase
B)the Phillips phase to the recovery phase
C)the Phillips phase
D)the Phillips phase to the stagflation phase and to recovery phase

Question 49

The essential feature of the stagflation phase of the inflation-unemployment cycle is

A)a shift in the short run aggregate supply curve to the right.
B)changes in expectations about the price level.
C)falling unemployment and rising inflation.
D)a shift of the LRAS curve to the right.

Question 50

Figure 16-7

Refer to Figure 16-7.At point 4, if policymakers are concerned about economic performance, they will most likely respond by

A)increasing government purchases and the money supply.
B)increasing taxes.
C)decreasing aggregate demand.
D)having the Fed sell bonds.

Question 51

Figure 16-7


-Refer to Figure 16-7.Over time, the aggregate supply curve shifts from SRAS₁ to SRAS₂ Because of

A)rising output prices.
B)economic agents adjust their expectations regarding prices and wages downwards.
C)a fall in nominal wages.
D)economic agents adjust their expectations regarding prices and wages upwards.

Question 52

Figure 16-7


-Refer to Figure 16-7.The movement from point 3 to point 4 is consistent with which phase Of the inflation-unemployment cycle?

A)Phillips phase because inflation is increasing while unemployment is falling
B)recovery phase because although inflation has risen, unemployment is closer to its natural rate
C)stagflation phase because inflation and unemployment have risen
D)recovery phase because the inflationary gap has been eliminated

Question 53

In the stagflation phase, a decrease in short-run aggregate supply will generate

A)an increase in the inflation rate and in the unemployment rate.
B)an increase in the inflation rate and a decrease in the unemployment rate.
C)an increase in the inflation rate with no change in the unemployment rate.
D)a decrease in the inflation rate and an increase in the unemployment rate.

Question 54

Figure 16-6

Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.When workers and firms adjust their expectations in a higher price level and act on these expectations, the economy moves from the

A)expansionary phase to the recovery phase of the inflation-unemployment cycle.
B)Phillips phase to the stagflation phase of the inflation-unemployment cycle.
C)Phillips phase to the recovery phase of the inflation-unemployment cycle.
D)stagflation phase to the recovery phase of the inflation-unemployment cycle.

Question 55

Figure 16-6

Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.What happens when workers and firms become aware of a rise in the general price to P_g?

A)Workers will agree to take wage cuts and firms will agree to lower prices to ward off inflation.
B)They will revise their expectations of future prices to incorporate the higher price level.
C)Firms with sticky prices will ultimately adjust their prices downward.
D)Firms and workers will agree to renegotiate wage contracts downward.

Question 56

In the late 1970s, the U.S.economy entered a stagflation phase characterized by

A)unemployment below its natural rate and rising inflation
B)unemployment above its natural rate and rising inflation.
C)unemployment at its natural rate and rising inflation.
D)unemployment above its natural rate and constant inflation.

Question 57

Figure 16-7

Refer to Figure 16-7.If the economy is in equilibrium at point 3,

A)it will most likely stay there for an indeterminate period.
B)the SRAS will most likely shift to the left because of firms and workers asking for higher prices and wages.
C)it will move to point 5 because of a shift in the aggregate supply curve from SRAS₁ to SRAS₂.
D)it will move to point 2 because the aggregate demand curve is likely to shift left in response to higher prices.

Question 58

Figure 16-7


-Refer to Figure 16-7.The movement from _____ is representative of the _____ phase of the Inflation-unemployment cycle.

A)point 1 to point 2; recovery
B)point 3 to point 4; stagflation
C)point 3 to point 2; Phillips
D)point 4 to point 3; Phillips

Question 59

The Phillips phase of the inflation-unemployment cycle emerges because

A)prices and wages are sticky.
B)nominal wages and prices fall.
C)the economy is stuck in an equilibrium below full employment.
D)people fully expect the price increases produced by increases in aggregate demand.

Question 60

The Phillips phase of the inflation-unemployment cycle drives the price level

A)below what workers and firms expected causing nominal wages to fall below their expected level.
B)below what workers and firms expected causing real wages to rise above their expected level.
C)above what workers and firms expected causing nominal wages to rise above their expected level.
D)above what workers and firms expected causing real wages to fall below their expected level.

Question 61

The recovery phase of the inflation-unemployment cycle emerges if

A)prices and wages are flexible.
B)nominal wages and prices rise.
C)resource prices are higher.
D)policymakers respond to a recessionary gap by increasing aggregate demand.

Question 62

Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies

A)have been focused on moving the economy to its potential output.
B)have clearly shown a reduced tolerance for inflation.
C)were concentrated on bringing the price of oil down.
D)have moved toward restraining growth in financial markets.

Question 63

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell.With which phase of the inflation-unemployment cycle does this conform to?

A)Phillips phase
B)Growth phase
C)Stagflation phase
D)Recovery phase

Question 64

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Which of the following could have caused this phenomenon?

A)Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left.
B)Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right.
C)Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right.
D)Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Question 65

Figure 16-8

Refer to Figure 16-8.The recessionary gap at point 4 was created

A)during the Phillips phase that occurred when the economy moved from point 3 to point 4.
B)when policymakers pursued expansionary policies to move the economy from point 3 to point 4.
C)during the stagflation phase that occurred when the economy moved from point 3 to point 4.
D)during the recovery phase when economic agents revised their price expectations in higher prices.

Question 66

In the recovery phase of the inflation-unemployment cycle,

A)the inflation rate rises.
B)although the price level rises, the inflation rate falls.
C)the price level falls.
D)the price level and the inflation rate fall.

Question 67

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession.Which of the Following best explains this move?

A)The Fed was concerned that the budget deficit would increase.
B)The Fed had failed to take into account the lag in monetary policy.
C)The Fed was taking explicit account of the lag in monetary policy.
D)The Fed wanted to avert a potential housing market crisis.

Question 68

In the graph of the inflation-unemployment cycle, the variable on the horizontal axis is _____ and the variable on the vertical axis is _______.

A)real GDP; price level
B)price level; unemployment rate
C)unemployment rate; inflation rate
D)inflation rate; unemployment rate

Question 69

In the recovery phase of the inflation-unemployment cycle, a falling rate of inflation means That the price level is

A)falling.
B)falling at an increasing rate.
C)rising by smaller and smaller percentages.
D)falling at a constant rate.

Question 70

Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course.He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following could have caused this phenomenon?

A)Increase in government spending that shifted the aggregate demand curve to the right.
B)Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right.
C)Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left.
D)Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Question 71

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Identify the stage of the inflation-unemployment cycle.

A)the stagflation phase
B)the recovery phase
C)the Phillips phase
D)the growth phase

Question 72

Figure 16-8


-Refer to Figure 16-8.The movement from point 3 to point 4 is consistent with which Segment in the diagram below?

A)segment A to D
B)segment A to B
C)segment B to C
D)segment C to D

Question 73

Figure 16-8


-Refer to Figure 16-8.The movement from point 4 to point 5 is consistent with which phase Of the inflation-unemployment cycle?

A)Phillips phase because inflation is increasing while unemployment is falling
B)recovery phase because although inflation has risen, unemployment has fallen
C)growth phase because the economy is producing above its potential output
D)recovery phase because inflation and unemployment have fallen

Question 74

Which of the following statements is true?

A)The aggregate demand-aggregate supply model attempts to explain the equilibrium level of real GDP and the price level.
B)The aggregate demand-aggregate supply model gives us inflation and the various levels of real GDP.
C)The inflation-unemployment cycle attempts to explain the equilibrium level of real GDP.
D)The inflation-unemployment cycle is based on movements up and down the Phillips curve.

Question 75

Which of the following affect the values of inflation and unemployment?
I.changes in government spending II.expectations about the price level
III.changes in nominal wages IV.changes in money supply

A)I and IV only
B)I, II, and IV only
C)II and III only
D)I, II, III, and IV

Question 76

In the recovery phase of the inflation-unemployment cycle,

A)inflation and unemployment fall.
B)inflation rises as unemployment falls.
C)inflation falls as unemployment rises.
D)inflation and real GDP rise.

Question 77

Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course.He pointed to recent reductions in unemployment as evidence that his economic policies are working." Identify the stage of the inflation-unemployment cycle.

A)the stagflation phase
B)the recovery phase
C)the Phillips phase
D)the contraction phase

Question 78

The recovery phase of the inflation-unemployment cycle is explained by

A)rightward shifts of the short-run aggregate supply curve in response to expansionary policies.
B)rightward shifts of the aggregate demand curve in response to expansionary policies.
C)leftward shifts of the short-run aggregate supply curve in response to higher prices.
D)leftward shifts of the aggregate demand curve in response to higher prices.

Question 79

Figure 16-7


-Refer to Figure 16-7.If the economy is at point 4, boosting aggregate demand through Expansionary policies will most likely lead to

A)the stagflation phase.
B)the recovery phase.
C)the Phillips phase.
D)the contraction phase.

Question 80

Figure 16-8


-Refer to Figure 16-8.The movement from point 4 to point 5 is consistent with which Segment in the diagram below?

A)segment A to D
B)segment A to B
C)segment B to C
D)segment C to D