AS-AD, Phillips Curve.pdf - 2 Which of the following would...

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Unformatted text preview: 2) Which of the following would be most likely to cause a change in the natural rate of unemployment? A) a change in monetary policy B) a change in fiscal policy C) a change in the composition of jobs D) a change in the rate of inflation E) a change in the price of oil 3) Assume that expected inflation is based on the following: !et = "!t-1. An increase in " will cause: A) an increase in the natural rate of unemployment. B) a reduction in the natural rate of unemployment. C) no change in the natural rate of unemployment. D) inflation in period t to be more responsive to changes in unemployment in period t. 4) Assume that expected inflation is based on the following: !et = "!t-1. If " = 0, we know that: A) a reduction in the unemployment rate will have no effect on inflation. B) low rates of unemployment will cause steadily increasing rates of inflation. C) high rates of unemployment will cause steadily declining rates of inflation. D) the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate. 5) Assume that expected inflation is based on the following: !et = "!t-1. If " = 1, we know that: A) a reduction in the unemployment rate will have no effect on inflation. B) low rates of unemployment will cause steadily increasing rates of inflation. C) the actual unemployment rate will not deviate from the natural rate of unemployment. D) the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate. 6) Which of the following statements will likely be correct when inflation has been persistent? A) Higher unemployment rates will be associated with lower inflation rates. B) Workers and firms ignore past inflation. C) The expected inflation rate for a given year will equal the previous year's actual inflation rate. D) Lower unemployment rates will be associated with higher inflation rates. E) The current inflation rate will not depend heavily on past inflation. 7) For this question, assume that expected inflation depends on past inflation. Also assume that the unemployment rate has been equal to the natural rate of unemployment for some time. Given this information, we know that: A) the rate of inflation should be zero. B) the rate of inflation should neither increase nor decrease. C) the rate of inflation should steadily increase. D) the rate of inflation should steadily decrease. E) the natural rate of unemployment should steadily decrease. 27) In the aggregate demand relation, a reduction in the price level causes output to increase because of its effect on: A) government spending. B) the interest rate. C) the nominal wage. D) firms' markup over labour costs. E) the expected price level. 28) The aggregate demand curve will shift to the right when which of the following occurs? A) a decrease in the money supply B) a reduction in consumer confidence C) a rise in the price level D) a decrease in taxes E) a decrease in the price level 29) Which of the following represents the short-run effect of an increase in the money supply? A) a decrease in output B) an increase in the interest rate C) a decrease in the price level D) none of the above E) all of the above 30) Suppose there is an increase in the price of oil. This change in the price of oil will cause which of the following in the medium run? A) a decrease in output B) no change in the price level C) an increase in the interest rate D) all of the above E) none of the above 31) Which of the following events would NOT cause a movement along aggregate supply curve in the short run? A) an increase in the money supply B) an increase in government spending C) a decrease in the markup D) all of the above E) none of the above 32) Which of the following would cause an increase in the natural level of output? A) a decrease in government spending B) a decrease in the money supply C) an increase in taxes D) a decrease in taxes E) none of the above ...
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