Question 1

The questions with which Chapter 12 is concerned include each of the following except

Accepted Answer

Chapter 12 typically deals with topics related to the Phillips curve, changes in the natural rate of unemployment, and expectations of inflation. It does not usually cover the Fiscal Policy Reaction Function, which is more directly related to fiscal policy analysis.

Question 2

The questions with which Chapter 12 is concerned include each of the following except

Accepted Answer

A

Question 3

The questions with which Chapter 12 is concerned include each of the following except

Accepted Answer

D

Question 4

The questions with which Chapter 12 is concerned include each of the following except

Accepted Answer

Chapter 12 does not focus on changes in potential output in the United States over generations; it is more concerned with models of price flexibility, the Phillips curve, and inflation expectations.

Question 5

The Phillips curve describes the relationship between

Accepted Answer

The Phillips curve illustrates the inverse relationship between the rate of inflation and the unemployment rate, suggesting that lower unemployment comes with higher inflation and vice versa.

Question 6

Okun's law relates

Accepted Answer

Okun's law describes the relationship between the unemployment rate and real GDP, indicating that as unemployment decreases, real GDP increases, and vice versa.

Question 7

The specific form of Okun's law relates

Accepted Answer

Okun's law describes the relationship between unemployment and economic output, specifically how deviations from the natural rate of unemployment are related to deviations from potential output.

Question 8

The specific form of Okun's law is

Accepted Answer

Okun's law relates the unemployment rate to GDP growth. The specific form given in option C, $u - u^* = -0.4 \times \left(\frac{Y - Y^*}{Y^*}\right)$, correctly represents the relationship between the actual unemployment rate ($u$) minus the natural rate of unemployment ($u^*$) and the percentage deviation of actual GDP ($Y$) from potential GDP ($Y^*$). This form shows that a decrease in GDP relative to potential GDP is associated with an increase in the unemployment rate.

Question 9

According to Okun's law,

Accepted Answer

Okun's law posits a negative relationship between changes in the unemployment rate and the growth rate of real GDP. Therefore, when real GDP is above potential output, it implies the economy is growing faster than its long-term sustainable rate, leading to lower unemployment as more workers are needed to meet the increased demand for goods and services.

Question 10

According to Okun's law,

Accepted Answer

Okun's law posits a negative relationship between unemployment and GDP, meaning that when real GDP is below potential output (indicating an economic downturn or recession), unemployment rates will be relatively high as businesses cut back on production and lay off workers.

Question 11

The equation for the Phillips curve is

Accepted Answer

The Phillips curve is a graphical representation of the relationship between the rate of inflation and the rate of unemployment. The equation for the Phillips curve is B = B^e - $ x (u - u*), where B is the actual rate of inflation, B^e is the expected rate of inflation, $ is a positive constant, u is the actual rate of unemployment, and u* is the natural rate of unemployment.

Question 12

If

Accepted Answer

The answer of If   
...

Question 13

The equation for the Phillips curve includes each of the following terms except

Accepted Answer

The Phillips curve typically includes the expected inflation rate, the unemployment rate, and sometimes a term for supply shocks, but it does not include a "natural inflation rate." The concept of a "natural rate" is more commonly associated with unemployment (the natural rate of unemployment) rather than inflation.

Question 14

The equation for the Phillips curve includes each of the following terms except

Accepted Answer

The Phillips curve traditionally includes the expected inflation rate, the unemployment rate, and the natural rate of unemployment to describe the relationship between inflation and unemployment. A demand shock term is not a standard component of the Phillips curve equation.

Question 15

The slope of the Phillips curve depends on

Accepted Answer

The slope of the Phillips curve depends on how sticky wages and prices are. The Phillips curve illustrates the inverse relationship between the rate of inflation and the rate of unemployment, suggesting that lower unemployment comes with higher inflation, and vice versa. The "stickiness" or flexibility of wages and prices affects how quickly the economy can move along the curve, as more rigid wages and prices can slow down adjustments to changes in demand or supply, impacting inflation and unemployment rates.

Question 16

The parameter  in the Phillips Curve equation tells us

Accepted Answer

The answer of The parameter  in the Phillips Curve...

Question 17

The smaller the parameter  in the Phillips Curve is

Accepted Answer

The answer of The smaller the parameter  in the...

Question 18

When inflation is higher than expected and production is higher than potential output

Accepted Answer

When inflation is higher than expected and production is higher than potential output, it typically indicates an overheated economy. In such scenarios, employers demand more labor to meet the high production levels, which reduces unemployment below the natural rate of unemployment. This is because the natural rate of unemployment is the level of unemployment consistent with sustainable economic activity, without accelerating inflation.

Question 19

When inflation is lower than expected and production is lower than potential output

Accepted Answer

When production is lower than potential output, it typically means that not all resources (including labor) are being fully utilized. This underutilization of labor leads to a higher unemployment rate, which would be above the natural rate of unemployment. The natural rate of unemployment is the level that would be expected in an economy that is producing at its potential output. Lower than expected inflation does not directly affect the natural rate of unemployment but can influence monetary policy responses.

Question 20

The stickier are wages and prices

Accepted Answer

The answer of The stickier are wages and prices
...

Quiz 12: The Phillips Curve, Expectations, and Monetary Policy

The questions with which Chapter 12 is concerned include each of the following except

The questions with which Chapter 12 is concerned include each of the following except

The questions with which Chapter 12 is concerned include each of the following except

The questions with which Chapter 12 is concerned include each of the following except

The Phillips curve describes the relationship between

Okun's law relates

The specific form of Okun's law relates

The specific form of Okun's law is

According to Okun's law,

According to Okun's law,

The equation for the Phillips curve is

If

The equation for the Phillips curve includes each of the following terms except

The equation for the Phillips curve includes each of the following terms except

The slope of the Phillips curve depends on

The parameter in the Phillips Curve equation tells us

The smaller the parameter in the Phillips Curve is

When inflation is higher than expected and production is higher than potential output

When inflation is lower than expected and production is lower than potential output

The stickier are wages and prices