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Problem Set #4 (Spring 2008)
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Name: _______________________
SID: _______________________
Discussion Section: _______________________
Problem Set #4
Due Tuesday, April 1, 2008
Problem Sets MUST
be wordprocessed 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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View Full DocumentProblem Set #4 (Spring 2008)
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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; decreases.
3.
In the expectationsaugmented 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.
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 Spring '08
 Wood

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