ECO

The targeted levels for Inflation, GDP, and Unemployment are:

2%, 3%, and 4-5%

The Philips curve shows the relationship between

inflation and unemployment

An event that directly affects firms' costs of production and thus the prices they charge is called

a supply shock.

Which of the following is an example of an adverse supply shock?

a worldwide drought

Which of the following explains why production rises in most years?

advances in technological knowledge increases in the capital stock increases in the labor force All of the other answers are correct

Unemployment would decrease and prices would increase if

aggregate demand shifted right

A decrease in the availability of an important major resource such as oil shifts

aggregate supply left

Which of the following results in higher inflation and higher unemployment in the short run?

an adverse supply shock such as an increase in the price of oil

The long-run aggregate supply curve shifts right if

immigration from abroad increases the capital stock increases technology advances All of the other answers are correct

When taxes decrease, consumption

increases as shown by a shift of the aggregate demand curve to the right.

According to the short-run Phillips curve, if the central bank increases the money supply, then

inflation will rise and unemployment will fall

One determinant of the natural rate of unemployment is the

minimum wage rate.

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand

the interest-rate effect

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

the long-run aggregate-supply curve to the right

A recession is

6 months or more of negative GDP growth

During the 2008-2009 unemployment rose from about 4.4% to about

10%

On average, over the last 50 years, real GDP has grown by about ​

3 percent per year

The only thing that shifts the Phillips Curve is

Aggregate Supply

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Bureau of Labor Statistics

The three top indicators of economic health are:

GDP, Inflation, and Unemployment

The Phillips Curve shows that when:

Inflation is high, Unemployment is high

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

None of the other answers is correct

When taxes increase, consumption

decreases as shown by a shift of the aggregate demand curve to the left

During a recession the economy experiences

falling employment and income

During recessions, income

falls and unemployment rises

When interest rates fall

firms want to borrow more for new plants and equipment and households want to borrow more for home building.

long-run inflation

is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors

If a central bank is independent,

its operations are not controlled by the political process.

If the minimum wage increased, then at any given rate of inflation

output would be lower and unemployment would be higher

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, production is (less/more) profitable and employment (rises/falls)

production is (more) profitable and employment (rises)

The short-run relationship between inflation and unemployment is often called

the Phillips curve