Examining data on cyclical unemployment plotted

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22. Examining data on cyclical unemployment plotted against unanticipated inflation shows (a) a positive relationship. (b) a negative relationship. (c) no significant relationship. (d) a relationship only during the 1960s. Answer: B
Level of difficulty: 1 Section: 12.1 23. The Friedman-Phelps analysis suggests that there is a long-term relationship between
Level of difficulty: 1 Section: 12.1
Chapter 12 Unemployment and Inflation 189 24. An analysis of the American economy since 1960 shows that there is a stable relationship between inflation and unemployment
Level of difficulty: 1 Section: 12.1 25. Both classicals and Keynesians agree that policymakers
Level of difficulty: 1 Section: 12.1 26. The Lucas critique is an objection to the assumption that (a) inflation is always and everywhere a monetary phenomenon. (b) there is a negative relationship between inflation and unemployment. (c) historical relationships between macroeconomic variables will continue to hold after new policies are in place. (d) people form expectations rationally. Answer: C
Level of difficulty: 1 Section: 12.1 27. The argument that when policy changes, people’s behavior changes so that historical relationships between macroeconomic variables will no longer hold is known as
Level of difficulty: 1 Section: 12.1

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