In the short run a the more flexible wages and prices

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Exploring Macroeconomics
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Chapter 19 / Exercise 45
Exploring Macroeconomics
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16) In the short run ________. A) the more flexible wages and prices are, the more inflation responds to the output gap B) the more sticky wages and prices are, the more difficult to tell the difference between the short run and long run aggregate supply curves C) if wages and prices are sticky, aggregate output is always at its potential level D) all of the above E) none of the above Answer: A Topic: 11.2 The Aggregate Supply Curve AACSB: Analytical Thinking 16 ScholarStock
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Exploring Macroeconomics
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Chapter 19 / Exercise 45
Exploring Macroeconomics
Sexton
Expert Verified
17) If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be ________.
B Topic: 11.2 The Aggregate Supply Curve AACSB: Analytical Thinking 18) When a price shock occurs, the inflation rate is affected ________.
E Topic: 11.2 The Aggregate Supply Curve AACSB: Analytical Thinking 19) When a price shock has occurred, inflation returns to its pre-shock rate ________.
E Topic: 11.2 The Aggregate Supply Curve AACSB: Analytical Thinking 20) Suppose the output gap is zero, and policy makers wish to reduce the inflation rate from 10 percent to 5 percent. Which of these policies seems best? A) contractionary policies to reduce output at least 5 percent below potential output B) a convincing declaration of the inflation rate target, so that expected inflation falls to 5 percent C) no policy action; inflation will fall on its own, eventually D) no policy action; inflation will converge to its long-run rate, regardless of policy E) price and wage controls to counteract their stickiness Answer:
B Topic: 11.2 The Aggregate Supply Curve AACSB: Analytical Thinking 17 ScholarStock
21) If Okun's law is U - = - 0.5 (Y - ), and potential output grows at 2% per year, then a recession that causes output to decrease by one percentage point will cause unemployment to increase by ________.
B Topic: 11.2 The Aggregate Supply Curve AACSB: Analytical Thinking

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