Macroeconomics 5th Edition by Olivier Blanchard

Exercise 4

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.
a. The U.S. unemployment rate will remain constant as long as there is positive output growth.
b. Many firms prefer to keep workers around when demand is low (rather than lay them off) even if the workers are underutilized.
c. The behavior of Okun's law across countries and across decades Is consistent with our knowledge of firms' behavior and labor market regulations.
d. There is a reliable negative relation between the rate of inflation and the growth rate of output.
e. In the medium run, the rate of inflation is equal to the rate of nominal money growth.
f. According to the Phillips curve relation, the sacrifice ratio is independent of the speed of disinflation.
g. If Lucas and Sargent were right, and if monetary policy was fully credible, there would be no relation between inflation and unemployment-i.e., no Phillips curve relation.
h. Contrary to the traditional Phillips curve analysis, Taylor's analysis of staggered wage contracts makes the case for a slow approach to disinflation.
i. Ball's analysis of disinflation episodes provides some sup-port for both the credibility effects of Lucas and Sargent and the wage-contract effects of Fischer and Taylor.