Question 1

Keynesians prefer a disinflation policy of

Accepted Answer

A)  cold turkey.
B)  stabilization.
C)  gradualism.
D)  aggregate demand management.

Question 2

Hyperinflation occurs when the inflation rate

Accepted Answer

A)  rises.
B)  declines.
C)  is extremely high.
D)  is extremely low.

Question 3

In the expectations-augmented Phillips curve,when the expected inflation rate is equal to the actual inflation rate,the economy will be in

Accepted Answer

A)  a recession.
B)  a boom.
C)  full-employment.
D)  a zero natural unemployment rate.

Question 4

The Lucas critique is an objection to the assumption that

Accepted Answer

A)  inflation is always and everywhere a monetary phenomenon.
B)  there is a negative relationship between inflation and unemployment.
C)  historical relationships between macroeconomic variables will continue to hold after new policies are in place.
D)  people form expectations rationally.

Question 5

The Phillips curve appeared to fit the data well for Canada in the

Accepted Answer

A)  1960s.
B)  1970s.
C)  1980s.
D)  1990s.

Question 6

If you were prime minister,what would you do to reduce the natural rate of unemployment? Propose at least three different methods.

Accepted Answer

Provide support for job training and wor...

Question 7

Ball's research showed that the sacrifice ratio

Accepted Answer

A)  was the same for all countries.
B)  was nearly zero for most countries.
C)  was about 10 for all countries except Canada,where it was about 1.5.
D)  varied considerably across countries.

Question 8

Examining data on cyclical unemployment plotted against unanticipated inflation shows

Accepted Answer

A)  a positive relationship.
B)  a negative relationship.
C)  no significant relationship.
D)  a relationship only during the 1960s.

Question 9

The failure of the Phillips curve

Accepted Answer

A)  was predicted during the 1960s,before the Phillips curve actually proved to be unstable.
B)  was discussed only after the data became available in the 1970s.
C)  was shown when the rational expectations were included in the macroeconomic models.
D)  was evident by the data during the 1960s.

Question 10

In the extended classical model,an unexpected decrease in aggregate demand would cause unanticipated inflation to be ________ and cyclical unemployment to be ________.

Accepted Answer

A)  positive;negative
B)  positive;positive
C)  negative;negative
D)  negative;positive

Question 11

The expectations-augmented Phillips curve implies that lower inflation is associated with

Accepted Answer

A)  a higher natural rate of unemployment.
B)  a lower cyclical unemployment rate.
C)  higher inflation expectations.
D)  a lower natural rate of unemployment.

Question 12

What is the Lucas critique,and why was it so important to macroeconomists in the 1970s?

Accepted Answer

The Lucas critique suggests that histori...

Question 13

A rapid and decisive reduction in the rate of growth of the money supply for the purpose of disinflation is called

Accepted Answer

A)  a salt water policy.
B)  a cold shower policy.
C)  gradualism.
D)  a cold turkey policy.

Question 14

When there is a hyperinflation,all of the following occur except

Accepted Answer

A)  people spend a lot of time and energy getting rid of currency as fast as possible.
B)  the government finds it difficult to collect taxes.
C)  markets become inefficient because prices are no longer reliable signals.
D)  people make fixed rate loans to protect themselves against inflation.

Question 15

One reason for the rise in the natural rate of unemployment is

Accepted Answer

A)  changes in the demographic composition of the work force.
B)  the rise in inflation.
C)  increased competition from foreign workers.
D)  the depreciation of the dollar relative to foreign currencies.

Question 16

The negative relationship between unemployment and inflation is known as the

Accepted Answer

A)  aggregate supply curve.
B)  aggregate demand curve.
C)  Phillips curve.
D)  efficiency wage line.

Question 17

Which of the following represents the expectations-augmented Phillips curve?

Accepted Answer

A)  Anticipated inflation rate is proportional to the cyclical unemployment rate.
B)  Unanticipated inflation rate is proportional to the cyclical unemployment rate.
C)  Unanticipated inflation rate is proportional to unemployment rate.
D)  Anticipated inflation rate is proportional to unemployment rate.

Question 18

The employment insurance has increased the size of the benefit to unemployed.This will cause

Accepted Answer

A)  the natural rate of unemployment to increase and the Phillips curve to shift left.
B)  the expected inflation to increase and the Phillips curve to shift left.
C)  the natural rate of unemployment to increase and the Phillips curve to shift right.
D)  the expected inflation to decrease and the Phillips curve to shift left.

Question 19

Friedman and Phelps argued that the Phillips curve could not be stable because

Accepted Answer

A)  it was not consistent with economic theory.
B)  it was not supported by the data.
C)  they thought the relationship was between the unanticipated inflation and unemployment.
D)  they thought the relationship was between the inflation and cyclical unemployment.

Question 20

Ball found that the disinflation in Canada had a sacrifice ratio of about

Accepted Answer

A)  0.5
B)  1.0
C)  1.5
D)  2.0

Exam 13: Unemployment and Inflation

Which of the following represents the expectations-augmented Phillips curve?

Correct AnswerverifiedShow Answer

What is the Lucas critique,and why was it so important to macroeconomists in the 1970s?

Correct AnswerverifiedThe Lucas critique suggests that histori...View AnswerShow Answer

A rapid and decisive reduction in the rate of growth of the money supply for the purpose of disinflation is called

Correct AnswerverifiedShow Answer

In the extended classical model,an unexpected decrease in aggregate demand would cause unanticipated inflation to be ________ and cyclical unemployment to be ________.

Correct AnswerverifiedShow Answer

Examining data on cyclical unemployment plotted against unanticipated inflation shows

Correct AnswerverifiedShow Answer

The Lucas critique is an objection to the assumption that

Correct AnswerverifiedShow Answer

Friedman and Phelps argued that the Phillips curve could not be stable because

Correct AnswerverifiedShow Answer

One reason for the rise in the natural rate of unemployment is

Correct AnswerverifiedShow Answer

The failure of the Phillips curve

Correct AnswerverifiedShow Answer

The employment insurance has increased the size of the benefit to unemployed.This will cause

Correct AnswerverifiedShow Answer

The expectations-augmented Phillips curve implies that lower inflation is associated with

Correct AnswerverifiedShow Answer

Ball found that the disinflation in Canada had a sacrifice ratio of about

Correct AnswerverifiedShow Answer

In the expectations-augmented Phillips curve,when the expected inflation rate is equal to the actual inflation rate,the economy will be in

Correct AnswerverifiedShow Answer

The negative relationship between unemployment and inflation is known as the

Correct AnswerverifiedShow Answer

When there is a hyperinflation,all of the following occur except

Correct AnswerverifiedShow Answer

Keynesians prefer a disinflation policy of

Correct AnswerverifiedShow Answer

If you were prime minister,what would you do to reduce the natural rate of unemployment? Propose at least three different methods.

Correct AnswerverifiedProvide support for job training and wor...View AnswerShow Answer

Ball's research showed that the sacrifice ratio

Correct AnswerverifiedShow Answer

Hyperinflation occurs when the inflation rate

Correct AnswerverifiedShow Answer

The Phillips curve appeared to fit the data well for Canada in the

Correct AnswerverifiedShow Answer

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The Lucas critique suggests that histori...
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In the extended classical model,an unexpected decrease in aggregate demand would cause unanticipated inflation to be and cyclical unemployment to be .

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Provide support for job training and wor...
View Answer

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