# set4 - Name SID Discussion Section Problem Set#4 ANSWERS...

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Problem Set #4 (Spring 2008) 1/8 Name: _______________________ SID: _______________________ Discussion Section: _______________________ Problem Set #4 ANSWERS Due Tuesday, April 1, 2008 Problem Sets MUST be word-processed except for graphs and equations. When drawing diagrams, the following rules apply: 1. Completely , clearly and accurately label all axes, lines, curves, and equilibrium points. 2. The original diagram and any equilibrium points MUST be drawn in black or pencil. 3. The first change in any variable, curve, or line and any new equilibrium points MUST be drawn in red. 4. The second change in any variable, curve, or line and any new equilibrium points MUST be drawn in blue. 5. The third change in any variable, curve, or line and any new equilibrium points MUST be drawn in green.

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Problem Set #4 (Spring 2008) 2/8
Problem Set #4 (Spring 2008) 3/8 QUESTIONS A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (1 points each.) 1. Friedman and Phelps suggested that there should NOT be a stable relationship between inflation and unemployment but that there should be a stable relationship between: a. Anticipated inflation and frictional unemployment. b. Anticipated inflation and cyclical unemployment. c. Unanticipated inflation and frictional unemployment. d. Unanticipated inflation and cyclical unemployment . 2. In the classical model, an anticipated decrease in the money supply would cause output to _____ and the price level to ______ in the short run. a. Increase; decrease. b. Increase, remain unchanged. c. Remain unchanged; increase. d. Remain unchanged; decrease. 3. In the expectations-augmented Phillips curve, π = π e – 3(u – 0.06), when π = 0.06 and π e = 0.03, then the unemployment rate is: a. 0.04. b. 0.05. c. 0.06. d. 0.07. 4. If the expected inflation rate is unchanged, a fall in the natural rate of unemployment would: a. Shift the Phillips curve to the right. b. Not shift the Phillips curve. c. Shift the Phillips curve to the left. d. Shift the Phillips curve to the left and shift the long-run Phillips curve to the right. 5. Classical economists argue that an adverse supply shock would: a. Raise neither the natural rate of unemployment nor the actual rate of unemployment. b. Raise the actual rate of unemployment but not the natural rate of unemployment. c. Raise the natural rate of unemployment but not the actual rate of unemployment. d. Raise both the natural rate of unemployment and the actual rate of unemployment.

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Problem Set #4 (Spring 2008) 4/8 6. Some economics argue that Okun’s Law overstates the cost of cyclical unemployment because: a. The cost of retaining workers must be offset against the loss in output that occurs when workers are unemployed. b.
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## This homework help was uploaded on 04/02/2008 for the course ECON 100B taught by Professor Wood during the Spring '08 term at Berkeley.

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set4 - Name SID Discussion Section Problem Set#4 ANSWERS...

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