Macroeconomics Essay

1797 words - 8 pages

1)

Which of the following explains why the original Phillips curve relation disappeared or, as some economists have remarked, "broke down" in the 1970s?

1)

_______
A)

Monetary policy became contractionary.
B)

Individuals changed the way they formed expectations of inflation.
C)

Individuals assumed that expected inflation would be zero
D)

Individuals assumed the expected price level for the current year would be equal to the actual price level from the previous year.
E)

More labor contracts became indexed to changes in inflation.



2)

Which of the following will tend to occur when a high proportion of a country's ...view middle of the document...

D)

all of the above
E)

none of the above



5)

Assume that expected inflation is based on the following: πet = θπt-1. If θ = 1, we know that:

5)

_______
A)

low rates of unemployment will cause steadily increasing rates of inflation.
B)

the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate.
C)

the actual unemployment rate will not deviate from the natural rate of unemployment.
D)

a reduction in the unemployment rate will have no effect on inflation.



6)

Suppose the Phillips curve is represented by the following equation: πt - πt-1 = 20 - 2ut. Given this information, we know that the natural rate of unemployment in this economy is:

6)

_______
A)

20%.
B)

6.5%.
C)

10%.
D)

5%.
E)

none of the above



7)

A reduction in the price of oil will likely cause which of the following?

7)

_______
A)

decrease the sum "μ+ z" in the Phillips curve equation
B)

decrease the natural rate of unemployment
C)

decrease the markup in the Phillips curve equation
D)

all of the above
E)

none of the above



8)

When a worker's nominal wage is indexed, the nominal wage is usually automatically adjusted based on movements in which of the following variables?

8)

_______
A)

the average wage in the country
B)

productivity
C)

the price level
D)

the price of the firm's product
E)

the average wage in the industry



9)

Suppose policy makers underestimate the natural rate of unemployment. In a situation like this, policy makers might implement a policy that:

9)

_______
A)

results in steadily rising inflation.
B)

attempts to maintain output below the natural level of output.
C)

both A and B
D)

results in deflation.



10)

As of 2005, what was the last year that U.S. experienced deflation?

10)

______
A)

1933

B)

1955

C)

1973

D)

1991

E)

2001



11)

Since 1970, the evidence for the U.S. suggests that the average rate of unemployment required to keep inflation constant has been:

11)

______
A)

between 1% and 2%.
B)

between 2% and 3%.
C)

between 3% and 4%.
D)

between 9% and 10%.
E)

none of the above



12)

Which of the following does NOT explain the relatively low price inflation compared to the higher wage inflation in the U.S. during the 1990s?

12)

______
A)

an increase in the natural rate of unemployment
B)

a reduction in benefits paid to workers
C)

a reduction in the price of oil
D)

the appreciation of the dollar



13)

When inflation has been persistent, high...

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