Question 1

During which decade did the original Phillips curve break down? Also,briefly explain why the original Phillips curve broke during this period.

Accepted Answer

The original Phillips curve broke down i...

Question 2

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

Accepted Answer

A)  10%.
B)  20%.
C)  6.5%.
D)  5%.
E)  none of the aboveF) All of the above
G) A) and D)

Question 3

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

Accepted Answer

A)  productivity
B)  the price of the firm's product
C)  the average wage in the country
D)  the average wage in the industry
E)  none of the aboveF) All of the above
G) A) and D)

Question 4

Which of the following will most likely cause a change in the natural rate of unemployment?

Accepted Answer

A)  changes in monetary policy
B)  changes in fiscal policy
C)  changes in expected inflation
D)  all of the above
E)  none of the aboveF) C) and D)
G) D) and E)

Question 5

For this question,assume that the expected rate of inflation is a function of past year's inflation.Also assume that the unemployment rate has greater than the natural rate of unemployment for a number of years.Given this information,we know that

Accepted Answer

A)  the rate of inflation will approximately be equal to zero.
B)  the rate of inflation should neither increase nor decrease.
C)  the rate of inflation should steadily increase over time.
D)  the rate of inflation should steadily decrease.
E)  the inflation rate will be approximately equal to the natural rate of unemployment.F) B) and D)
G) C) and E)

Question 6

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

Accepted Answer

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.E) B) and C)
F) A) and B)

Question 7

Explain how the unexpectedly high rate of productivity growth at the end of the 1990s affected inflation and unemployment during this period.

Accepted Answer

The unexpectedly high rate of growth of ...

Question 8

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?

Accepted Answer

A)  the appreciation of the dollar
B)  a reduction in benefits paid to workers
C)  an increase in the natural rate of unemployment
D)  a reduction in the price of oilE) B) and D)
F) B) and C) C

Question 9

What is the difference between deflation and disinflation?

Accepted Answer

Deflation refers to a decrease...

Question 10

Data for which country were first used to illustrate the relationship between unemployment and inflation (i.e.,the original Phillips curve) ?

Accepted Answer

A)  France
B)  United States
C)  Canada
D)  Germany
E)  none of the aboveF) All of the above
G) A) and D)

Question 11

The original Phillips curve implied or assumed that

Accepted Answer

A)  the markup over labor costs was zero.
B)  the expected rate of inflation would be zero.
C)  the actual and expected rates of inflation would always be equal.
D)  all of the above
E)  none of the aboveF) A) and B)
G) A) and C)

Question 12

As the proportion of labor contracts that index wages to prices declines,we would expect that

Accepted Answer

A)  a reduction in the unemployment rate will now have a smaller effect on inflation.
B)  the natural rate of unemployment will increase.
C)  the natural rate of unemployment will decrease.
D)  nominal wages will become more sensitive to changes in unemployment.E) B) and D)
F) B) and C) A

Question 13

An increase in the price of oil will likely cause which of the following?

Accepted Answer

A)  increase the markup in the Phillips curve equation
B)  increase the sum "m+ z" in the Phillips curve equation
C)  increase the natural rate of unemployment
D)  all of the above
E)  none of the aboveF) C) and D)
G) B) and D)

Question 14

Explain how changes in the proportion of contracts that are indexed affect how a given change in monetary policy will affect economic activity.

Accepted Answer

An increase in nominal money growth will...

Question 15

Suppose the Phillips curve is represented by the following equation: πt - πt-1 = 20 - 2ut.Given this information,which of the following is most likely to occur if the actual unemployment in any period is equal to 6%?

Accepted Answer

A)  the rate of inflation will tend to increase
B)  the rate of inflation will be constant
C)  the rate of inflation will tend to decrease
D)  none of the aboveE) A) and D)
F) B) and C)

Question 16

In which of the following decades did the Phillips curve break down for the U.S.?

Accepted Answer

A)  1940s
B)  1950s
C)  1960s
D)  none of the aboveE) A) and D)
F) A) and C)

Question 17

Which of the following situations generally exists when deflation occurs?

Accepted Answer

A)  inflation and unemployment are both increasing
B)  inflation and unemployment are both decreasing
C)  the price level is decreasing
D)  the rate of inflation is falling from,for example,10% to 3%
E)  the natural rate of unemployment is zeroF) A) and D)
G) B) and E) C

Question 18

For this question,assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (m + z) - αut.Given this information,the natural rate of unemployment will be equal to

Accepted Answer

A)  m + z.
B)   (m + z - α) .
C)  α(m + z) .
D)  0.
E)  none of the aboveF) A) and E)
G) A) and C)

Question 19

A number of factors are believed to have caused changes in the natural rate of unemployment in the United States during the 1990s.Briefly comment on each of these factors.

Accepted Answer

There are a number of candidates here: d...

Question 20

During the Great Depression,the actual unemployment rate in the U.S.________,and the natural rate apparently ________.

Accepted Answer

A)  increased; decreased
B)  increased; remain unchanged
C)  increased; increased as well
D)  decreased; increased
E)  decreased; remained unchangedF) A) and E)
G) B) and E)

Exam 8: The Phillips Curve,the Natural Rate of Unemployment,and Inflation

During which decade did the original Phillips curve break down? Also,briefly explain why the original Phillips curve broke during this period.

Correct AnswerverifiedThe original Phillips curve broke down i...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following will most likely cause a change in the natural rate of unemployment?

Correct AnswerverifiedShow Answer

For this question,assume that the expected rate of inflation is a function of past year's inflation.Also assume that the unemployment rate has greater than the natural rate of unemployment for a number of years.Given this information,we know that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain how the unexpectedly high rate of productivity growth at the end of the 1990s affected inflation and unemployment during this period.

Correct AnswerverifiedThe unexpectedly high rate of growth of ...View AnswerShow Answer

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?

Correct AnswerverifiedC

What is the difference between deflation and disinflation?

Correct AnswerverifiedDeflation refers to a decrease...View AnswerShow Answer

Data for which country were first used to illustrate the relationship between unemployment and inflation (i.e.,the original Phillips curve) ?

Correct AnswerverifiedShow Answer

The original Phillips curve implied or assumed that

Correct AnswerverifiedShow Answer

As the proportion of labor contracts that index wages to prices declines,we would expect that

Correct AnswerverifiedA

An increase in the price of oil will likely cause which of the following?

Correct AnswerverifiedShow Answer

Explain how changes in the proportion of contracts that are indexed affect how a given change in monetary policy will affect economic activity.

Correct AnswerverifiedAn increase in nominal money growth will...View AnswerShow Answer

Suppose the Phillips curve is represented by the following equation: πt - πt-1 = 20 - 2ut.Given this information,which of the following is most likely to occur if the actual unemployment in any period is equal to 6%?

Correct AnswerverifiedShow Answer

In which of the following decades did the Phillips curve break down for the U.S.?

Correct AnswerverifiedShow Answer

Which of the following situations generally exists when deflation occurs?

Correct AnswerverifiedC

For this question,assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (m + z) - αut.Given this information,the natural rate of unemployment will be equal to

Correct AnswerverifiedShow Answer

A number of factors are believed to have caused changes in the natural rate of unemployment in the United States during the 1990s.Briefly comment on each of these factors.

Correct AnswerverifiedThere are a number of candidates here: d...View AnswerShow Answer

During the Great Depression,the actual unemployment rate in the U.S.________,and the natural rate apparently ________.

Correct AnswerverifiedShow Answer

Correct Answer
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The original Phillips curve broke down i...
View Answer

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The unexpectedly high rate of growth of ...
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C

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Deflation refers to a decrease...
View Answer

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A

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An increase in nominal money growth will...
View Answer

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C

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There are a number of candidates here: d...
View Answer

During the Great Depression,the actual unemployment rate in the U.S.,and the natural rate apparently .

Correct Answer
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