35 - Chapter 17 The ShortRun Tradeoff between Inflation and...

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Chapter 17 The Short-Run Tradeoff between Inflation and Unemployment MULTIPLE CHOICE 1. Closely watched indicators such as the inflation rate and unemployment are released each month by the a. Bureau of the Budget. b. Bureau of Labor Statistics. c. Department of the Treasury. d. President’s Council of Economic Advisors. ANSWER: b. Bureau of Labor Statistics. TYPE: M DIFFICULTY: 1 SECTION: 17.0 2. The misery index is calculated as the a. inflation rate plus the unemployment rate. b. unemployment rate minus the inflation rate. c. actual inflation rate minus the expected inflation rate. d. natural unemployment rate plus the long-run inflation rate. ANSWER: a. inflation rate plus the unemployment rate. TYPE: M DIFFICULTY: 1 SECTION: 17.0 3. The misery index is supposed to measure the a. social cost of unemployment. b. health of the economy. c. lost output associated with a particular unemployment rate. d. short-run tradeoff between inflation and unemployment. ANSWER: b. health of the economy. TYPE: M DIFFICULTY: 1 SECTION: 17.0 4. One determinant of the natural rate of unemployment is the a. rate of growth of the money supply. b. minimum wage rate. c. expected inflation rate. d. All of the above are correct. ANSWER: b. the minimum wage rate. TYPE: M DIFFICULTY: 1 SECTION: 17.0 5. One determinant of the long-run average unemployment rate is the a. market power of unions, while the inflation rate depends primarily upon the government spending. b. minimum wage, while the inflation rate depends primarily upon the money supply growth rate. c. rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions. d. role of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive. ANSWER: b. minimum wage, while the inflation rate depends primarily upon the money supply growth rate. TYPE: M DIFFICULTY: 1 SECTION: 17.0 6. In the long run, the inflation rate depends primarily on a. the ability of unions to raise wages. b. government spending. c. the money supply growth rate. d. the monopoly power of firms. ANSWER: c. the money supply growth rate. TYPE: M DIFFICULTY: 2 SECTION: 17.0 177
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178   Chapter 17/The Short-Run Tradeoff between Inflation and Unemployment 7. In the long run, a. the natural rate of unemployment depends primarily on the level of aggregate demand. b. inflation depends primarily upon the money supply growth rate. c.
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This note was uploaded on 07/23/2009 for the course BUS BUS217 – taught by Professor Staff during the Spring '09 term at California Baptist University.

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35 - Chapter 17 The ShortRun Tradeoff between Inflation and...

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