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