ch 14

Question 1

According to the imperfect-information model, when the price level rises by the amount the producer expected i

Answer 1

does not change production.

Question 2

Inflation inertia is represented in the aggregate supply–aggregate demand model by continuing upward shifts in

Answer 2

Aggregate demand curve

Question 3

Inflation inertia is represented in the aggregate supply–aggregate demand model by continuing upward shifts in

Answer 3

a lower rate of inflation for any level of unemployment.

Question 4

The government can lower inflation with a low sacrifice ratio if the:

Answer 4

public believes that policymakers are committed to reducing inflation

Question 5

According to the Phillips curve, other things being equal, inflation depends positively on:

Answer 5

expected inflation.

Question 6

The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation:

Answer 6

equals the inflation rate.

Question 7

According to the natural-rate hypothesis, output will be at the natural rate:

Answer 7

in the long run

Question 8

(Exhibit: AD–AS Shifts

Answer 8

a to b

Question 9

The short-run aggregate supply curve is drawn for a given:

Answer 9

expected price level.

Question 10

Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price le

Answer 10

less than the expected price level.

Question 11

Advocates of the rational-expectations approach predict that a credible policy to lower inflation will ______ the

Answer 11

lower

Question 12

no long-run tradeoff between inflation and unemployment.
a long-run tradeoff between inflation and unemployment.
a very small sacrifice ratio.
a very large sacrifice ratio.

Answer 12

a long-run tradeoff between inflation and unemployment.??????

Question 13

Based on the Phillips curve, unexpected movements in inflation are related to ______, and based on the short-run aggregate supply curve, unexpected movements in the price level are related to ______.

Answer 13

unemployment; output

Question 14

In the case of demand-pull inflation, other things being equal:

Answer 14

the inflation rate rises but the unemployment rate falls.

Question 15

Assume that an economy has the Phillips curve π = π–1 – 0.5(u – 0.06). Then the natural rate of unemploym

Answer 15

.06???

Question 16

The percentage of a year’s real GDP that must be foregone to reduce inflation by 1 percentage point is called the:

Answer 16

the sacrifice ratio