Macro
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| show | economists do not completely agree on the reasons for the slow adjustment of wages and prices after demand-side disturbances
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| show | workers' expectations about price changes are only wrong temporarily
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| For many government decision makers, the original Phillips curve implied | show 🗑
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| If we look at the annual U.S. unemployment rates over the last three decades, we see | show 🗑
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| The Phillips curve shows a relationship between | show 🗑
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| According to the Phillips curve relationship, if unemployment is at the natural rate, then | show 🗑
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| show | an increase in monetary growth affects unemployment and inflation in the short run, but only affects inflation in the long run
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| The coordination approach to the Phillips curve focuses on the fact that | show 🗑
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| show | unemployment is at its natural rate when expected inflation is equal to actual inflation
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| show | cannot persist, since the economy eventually will return to full employment
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| The natural rate of unemployment is | show 🗑
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| A difference between the inflation-expectations-augmented Phillips curve and the Phillips curve that is based on rational expectations is that | show 🗑
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| The rational expectations hypothesis predicts that | show 🗑
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| If nominal wage rates were completely flexible, then | show 🗑
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| show | -the fact that the unemployed do not take part in collective bargaining
-the fact that wages do not respond significantly to changes in the unemployment rate
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| Wages are considered to be sticky rather than flexible since | show 🗑
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| show | -the AS-curve is vertical
-paying emply higher wages won't induce them to work harder
-even unanticipated changes in monetary or fiscal policy have no effect on the level of output
E)none
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| The inverse relationship between inflation and unemployment is called | show 🗑
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| Okun's law states that one extra percentage point in unemployment causes | show 🗑
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| show | allowing for the role of forecasting errors
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| show | the resulting unemployment will cause downward pressure on nominal wages, so the cost of production will decrease
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| In the medium run the aggregate supply curve is upward sloping since | show 🗑
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| The fact that nominal wages are fixed by a contract at the beginning of a period while prices of goods may change within that period, implies that | show 🗑
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| show | -always grows twice as fast as the output gap
-always is negative
-always increases as the rate of inflation increases
-always stays at its natural level
E)none of the above
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| show | the quantity theory of money
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| The upward-sloping AS-curve will shift eventually to the left if | show 🗑
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| show | the Phillips curve shifts as soon as actual inflation changes
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| Assume the Fed implements restrictive monetary policy. Which of the following is the most likely result in an AD-AS framework with an upward sloping AS-curve? | show 🗑
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| In an AD-AS model with an upward-sloping AS-curve, the most likely effects of fiscal expansion would be | show 🗑
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| show | expansionary fiscal or monetary policy
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| Assume output is at its full-employment level and the Fed restricts money supply. What is the most likely outcome? | show 🗑
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| show | prices and interest rates will decrease in the medium and long run while output will be negatively affected in the medium run but not in the long run
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| Assume the economy is at full employment and the Fed restricts money supply. What will be the effects on output and prices? | show 🗑
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| show | more consumption and less investment, with output remaining unchanged
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| In the long run, real money balances | show 🗑
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| show | -nominal wages change in proportion to nominal money supply
-real interest rates remain constant
-real wages remain constant
-nominal wages and prices change in proportion to nominal money supply
E)all of the above
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| In an AD-AS model with an upward sloping AS-curve, what would happen if oil prices increased and the Fed responded by restricting money supply? | show 🗑
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| show | a decrease in material prices
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| show | real wages will decline while the levels of output and prices will remain unchanged
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| show | decrease prices and increase output
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| Which of the following is the most likely medium-run outcome of an adverse supply shock? | show 🗑
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| show | real GDP will decrease but prices will increase
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| If policy makers want to get the price level quickly back to its original level following an adverse supply shock, they need to | show 🗑
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| In the 1990s, the consumer price index | show 🗑
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| show | an increase in unemployment can be avoided but only at the cost of increased inflation
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| show | unemployment will remain the same but prices would increase
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| When we look at the real (inflation adjusted) price of crude oil over the last four decades, we realize that | show 🗑
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| In the long run, an increase in nominal money supply will | show 🗑
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| show | an adverse supply shock accommodated by expansionary monetary policy
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| show | expansionary fiscal policy employed after a favorable supply shock
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