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Econ 110A Ch 8 Homework Questions Please, do not use a calculator or any other devices such as cell phones or computers. 1. According to the original Philips-curve equation, an increase in the ___ causes a reduction in the current inflation rate? A. expected inflation rate. B. markup. C. unemployment rate. 2. Which one represents the Philips-curve equation? A. Π t - Π t-1 = - α (u n - u t ). B. Π t - Π t-1 = - α (u t - u n ). C. Π t - Π t-1 = - αu n . D. Π t - Π t-1 = αu t . 3. According to the Philips-curve equation, if u t < u n , A. Π t > Π t-1 . B. Π t < Π t-1 . C. Π t = Π t-1 . D. Π t = 0. 4.. If the economy is at the NAIRU (nonaccelerating inflation rate of unemployment), A. Π t = 0. B. Π t-1 = 0. C. Π t = Π t-1 . D. Π t = u n . 5. Let Π t e = θΠ t-1 , where θ is a constant between zero and one. Since the mid-1970s, the value of θ has ___ in the U.S. A. increased. B. decreased. C. not changed. D. been zero. 6. Which one has contributed to the decrease in the natural rate of unemployment in the
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Unformatted text preview: U.S. since the early 1990s? A. the decrease in the prison population. B. the high rate of productivity growth. C. the increase in the proportion of young workers. D. the decrease in temporary help employment. 7. Wage indexation occurs when A. wages are ranked according to occupations. B. wages automatically increase in line with inflation. C. the government orders employers to increase wages. D. wages and taxes increase at the same rate. 8. Wage indexation ____ the effect of unemployment on inflation. A. increases. B. decreases. C. does not change. 9. Explain the reason for the answer to question 5. Answer Key 1. C. 2. B 3. A 4. C 5. A 6. B. 7. B 8. A 9. Inflation has increased and has the been persistent since the mid-1970s, making people expect that this year’s inflation is the same as the last year’s inflation. As a result, θ gets closer to one....
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This note was uploaded on 09/29/2010 for the course ECON 110A taught by Professor Laboskey during the Summer '08 term at Alabama.

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