MACRO QUIZ 11

Look at graph: If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to

B and 2

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.

France has a higher natural rate if unemployments than the United States. This suggest

France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.

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

a supply shock.

Which of the following would shift the long-run Phillips curve to the right?

increases in unemployment compensation

Which of the following depends primarily in the growth rate of the money supply?

inflation but not the natural rate of unemployment

The sacrifice ratio is the

number of percentage points annual output falls for each percentage point reduction in inflation.

The theory by which people optimally use all available information when forecasting the future is known as

rational expectations

According to the long-run, Phillips curve, in the long run monetary policy influences

the inflation rate but not the unemployment rate

In the short run,

unemployment and inflation are negatively related. In the long run they are largely unrelated problems