Econ test 3

Inflationary pressures increase when the economy moves:

to the left of the long-run phillips curve

Over the past several years, the target rate of unemployment has risen. Which of the following would not be used to explain this?

Congress passed a bill that requires the target rate to rise along with rising government deficits

Why doesn't the minimum job proposal provide output directly useful to the marketplace?

If it did, it might be replacing jobs otherwise provided by the market.

Inflationary expectations are important because widespread changes in inflationary expectations affect:

actual inflation

According to the text, if individuals base their expectations on the past we could say that their expectations are:

adaptive

If actual inflation is correctly expected and built into people's wage and price setting decisions, the Phillips curve:

becomes a vertical line

Which of the following groups tends to have the highest unemployment rates?

blacks

cyclical unemployment:

can be reduced with demand side policies

The target rate of unemployment:

can change over time

inflation

can obscure relative price changes.

Structural unemployment:

cannot be reduced with demand side policies.

The quantity theory of money concludes that if real output is constant:

changes in the price level are caused by changes in the money supply.

Which of the following types of unemployment is considered to be the most controllable through demand-side macroeconomic policy?

cyclical unemployment

Unemployment caused by recession is called:

cyclical unemployment.

Which of the following has been an effect of globalization and a large trade deficit?

decreased employment in the tradable sector

Inflation is undesirable because it:

distorts the information value of prices.

A central policy concern about inflation is to see that it

does not become built into expectations

A situation in which the price level increases at an extremely high rate is called:

hyperinflation

In the equation of exchange, if the velocity of money is constant, a 10 percent increase in the money supply must:

increase nominal GDP by 10 percent

The quantity theory of money implies that an increase in the money supply will ultimately:

increase the price level and leave real GDP unchanged.

Unemployment will be at its target rate when actual inflation is:

3 percent and expected inflation is 3 percent.

According to the quantity theory of money, if the monetary authorities allow the money supply to grow at a rate of 6 percent in an economy that is growing by 2 percent in real terms, then inflation will be:

4 percent

According to the quantity theory of money, inflation is attributable to increases in:

the money supply in excess of increases in real GDP.

A decline in the number of immigrants into the United States would most likely reduce:

the target rate of unemployment

if there is inflation

the unit of account function of money is undermined

the equation of exchange is expressed as

MV = PQ

Why doesn't the minimum job proposal offer jobs commensurate with people's skills and education?

These people are holding out for a job in the marketplace. Providing them with jobs wouldn't be offering a minimum job, which is the program's objective.

Why does the minimum job pay a maximum of $10 an hour?

To limit the number of people who will participate.

Unemployment rates above the target rate of unemployment lead to:

a downward shift of the short-run Phillips curve.

With respect to the unemployment problem, social responsibility framework economists generally take the position that:

each person should have a job commensurate with their training or past job experience.

The quantity theory of money:

explains high inflation rates well but does not explain low inflation rates well.

Cyclical unemployment results from:

fluctuations in economic activity

Assuming velocity is constant, the rate of inflation equals the difference between the rate of:

growth in the money supply and the rate of growth in real GDP.

Inflation

has both benefits and costs

Stagflation is a combination of:

high and accelerating inflation and high unemployment.

With respect to the unemployment problem, individual responsibility framework supporters generally take the position that:

individuals should be responsible for finding their own jobs.

According to the quantity theory:

inflation is everywhere and always a monetary phenomenon.

According to the quantity theory of money, velocity:

is virtually constant, responding only to changes in the underlying institutional structure.

it can be argued that the minimum jobs proposal is preferable to a minimum wage law because:

it puts a floor on the wage as well as on the nature of the job

The target rate of unemployment can be affected by all of the following except the:

level of output.

policy makers

like inflation because it allows individuals to maintain illusions

A reason that the quantity theory of money has lost favor is that:

money growth and inflation are no longer closely related.

Velocity can be calculated as the ratio of:

nominal GDP to the money supply

Structural unemployment is caused by:

people losing a job when their skills become obsolete due to technological innovations.

What will likely lower structural unemployment?

people lower their reservation wages

The fact that more women have entered the labor force has:

raised the target rate of unemployment

The higher the rate of inflation, the lower the:

real interest rate can fall

a cost of inflation is that it

reduces the informational content of prices

The wage a person requires before accepting a job is referred to as the_____ wage:

reservation wage

In the U. S. potential output in the long run tends to:

rise at a trend rate of 2.5 to 3.5 percent per year.

Using Okun's rule of thumb, if trend growth is 3 percent and the unemployment rate rises by 0.5 percent, output would be expected to have:

risen by two percentage points

A reservation wage that is higher than the equilibrium wage creates:

structural unemployment

Mexico can produce vine-ripened tomatoes at a lower opportunity cost than firms in the United States. Through trade negotiations, the United States lifted quotas limiting the import of tomatoes from Mexico. Some firms in Florida, in the face of this new competition, had to close their farms and let go their workers. Many of the workers could not find new jobs right away. What type of unemployment describes the workers' situation?

structural unemployment

Workers at a car-manufacturing plant are let go because automated machinery has been installed that requires fewer employees to operate. What type of unemployment describes the workers' situation?

structural unemployment

technological change can result in:

structural unemployment

Which of the following institutional changes would tend to reduce the target rate of unemployment?

the aging of the population

Institutionally focused economists argue:

the equation of exchange should be read from right to left.