Chapter 9: The Crisis1) The Phillips curve shows that when the unemployment rate is lower than the natural rate, A) inflation is higher than expected.B) inflation is lower than expected.C) policy rate is higher than expected.D) policy rate is lower than expected.Answer:

ADiff: 22) The Phillips curve shows that when the unemployment rate is higher than the natural rate,

BDiff: 23) Okun's law shows that when the unemployment rate is above the natural rate,

CDiff: 24) Okun's law shows that when the unemployment rate is below the natural rate,

DDiff: 25) Disposable income equalsA) income minus saving.B) income minus both saving and taxes.C) consumption minus taxes.D) the sum of consumption and saving.E) none of the aboveAnswer:

DDiff: 11

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6) In the IS-LM-PC model, which of the following is assumed to be exogenous?

ADiff: 27) In the IS-LM-PC model, investment does not depend on

ADiff: 28) In the IS-LM-PC model, LM curve is

ADiff: 29) The change in the unemployment rate is approximately equal toA) the negative of the growth rate of output.B) the negative policy rate.C) the negative inflation rate.D) the negative of the growth rate of money supply.Answer:

ADiff: 2