Question 1

A)W.Phillips' study of unemployment and inflation in the U.K.specifically looked at the empirical relationship between the unemployment rate and the

Accepted Answer

Phillips' study specifically looked at the relationship between unemployment and the rate of change in nominal wages, also known as the wage inflation rate. He found that as unemployment decreased, the wage inflation rate increased, leading to an upward pressure on prices. This relationship became known as the Phillips Curve. Therefore, the correct choice is B - rate of change in nominal wages.

Question 2

According to the Friedman-Lucas money surprise model,we should expect a stable relationship between

Accepted Answer

According to the Friedman-Lucas money surprise model, deviations in the inflation rate from what it is expected to be and deviations in real output from trend are expected to have a stable relationship. This relationship is known as the Phillips curve, which shows an inverse relationship between inflation and unemployment. This implies that when inflation is higher than expected, output is also higher than its trend level, and vice versa. Therefore, the best choice is D.

Question 3

There is a

Accepted Answer

Nominal wages and other money prices often move together due to inflationary pressures, leading to a positive correlation.

Question 4

There is a

Accepted Answer

This is the only option that states a negative correlation between two economic variables. Specifically, it suggests that as the rate of change in nominal wages decreases, the unemployment rate increases. This relationship is often referred to as the Phillips Curve. The other answer choices either suggest a positive correlation or do not provide a clear relationship between the variables mentioned.

Question 5

According to the Friedman-Lucas money surprise model,a surprise change in the money supply will imply a

Accepted Answer

According to the Friedman-Lucas money surprise model, a surprise change in the money supply will lead to an unexpected change in the inflation rate. This is because the model assumes that individuals and firms are rational and adjust their expectations based on new information, including changes in the money supply. As a result, a surprise increase in the money supply will lead to higher inflation expectations and a corresponding increase in the actual inflation rate.

Question 6

Economic costs of inflation include

Accepted Answer

Inflation leads to a decrease in the purchasing power of money, causing people to hold less real money balances.

Question 7

When the Friedman-Lucas money surprise model is incorporated into the Phillips curve,

Accepted Answer

In the Friedman-Lucas money surprise model, when the inflation rate is equal to the expected inflation rate, there are no surprises, and thus output is equal to trend output.

Question 8

The Phillips curve relationship in the Canadian data began to disintegrate in the

Accepted Answer

The Phillips curve relationship in the Canadian data began to disintegrate in the 1980s due to a number of factors, including globalization, technological change, and the rise of the service sector.

Question 9

The Phillips curve describes the

Accepted Answer

The answer of The Phillips curve describes the
...

Question 10

In the central bank commitment story,high inflation in Canada during the 1970s was caused by

Accepted Answer

The high inflation in Canada during the 1970s was caused by the inability of the Bank of Canada to commit to not using surprise inflation to increase output in the short run. This lack of commitment led to inflation expectations becoming embedded in the economy, causing a spiral of rising prices and wages. Lower interest rates, a deterioration of the trade balance, an appreciation of the domestic exchange rate, and a commitment to reduce government spending may have contributed to the inflation, but the root cause was the central bank's inability to credibly commit to a low inflation policy.

Question 11

A Phillips curve relationship best fits the Canadian data in the

Accepted Answer

The Phillips curve relationship best fits the Canadian data in the 1960s, as this was the period when inflation and unemployment were found to be inverse. This means that when unemployment was low, inflation tended to be high, and when unemployment was high, inflation tended to be low. This relationship held true until the mid-1970s, when stagflation and oil shocks disrupted the traditional Phillips curve relationship.

Question 12

The existence of large government budget deficits

Accepted Answer

Large government budget deficits often lead to hyperinflations as governments may resort to printing money to finance the deficit, causing rapid increases in the money supply and prices. However, moderate inflations can occur due to various other factors and do not always require large deficits.

Question 13

Deviation of GDP from trend appear to be

Accepted Answer

The answer of Deviation of GDP from trend appear to...

Question 14

Of the following five decades,there was a Phillips curve with a less favourable trade-off in the

Accepted Answer

The answer of Of the following five decades,there was a...

Question 15

According to the Friedman-Lucas money surprise model,there is a positive relationship between the deviation of the inflation rate from what it is expected to be,and the

Accepted Answer

The Friedman-Lucas money surprise model suggests that unexpected changes in inflation can lead to deviations in real output from its trend, as agents adjust their behavior based on the surprise in monetary policy.

Question 16

Recently,inflation in Canada has been

Accepted Answer

The answer of Recently,inflation in Canada has been
...

Question 17

Which of the following models helps to explain the Phillips curve?

Accepted Answer

The answer of Which of the following models helps to...

Question 18

All historical periods of hyperinflation can be traced back to

Accepted Answer

Hyperinflation is often caused by a combination of factors including rapid money supply growth, a lack of confidence in a country's currency, and government budget deficits, which can lead to excessive government borrowing and money creation. However, among these factors, the existence of large government budget deficits has played a significant role in all historical periods of hyperinflation.

Question 19

Of the following five decades,the observed Canadian Phillips curve was steepest in the

Accepted Answer

The answer of Of the following five decades,the observed Canadian...

Question 20

Recently,inflation in Canada has been

Accepted Answer

The answer of Recently,inflation in Canada has been
...

Quiz 18: Money, Inflation, and Banking: A Deeper Look

A) W.Phillips' study of unemployment and inflation in the U.K.specifically looked at the empirical relationship between the unemployment rate and the

According to the Friedman-Lucas money surprise model,we should expect a stable relationship between

There is a

There is a

According to the Friedman-Lucas money surprise model,a surprise change in the money supply will imply a

Economic costs of inflation include

When the Friedman-Lucas money surprise model is incorporated into the Phillips curve,

The Phillips curve relationship in the Canadian data began to disintegrate in the

The Phillips curve describes the

In the central bank commitment story,high inflation in Canada during the 1970s was caused by

A Phillips curve relationship best fits the Canadian data in the

The existence of large government budget deficits

Deviation of GDP from trend appear to be

Of the following five decades,there was a Phillips curve with a less favourable trade-off in the

According to the Friedman-Lucas money surprise model,there is a positive relationship between the deviation of the inflation rate from what it is expected to be,and the

Recently,inflation in Canada has been

Which of the following models helps to explain the Phillips curve?

All historical periods of hyperinflation can be traced back to

Of the following five decades,the observed Canadian Phillips curve was steepest in the

Recently,inflation in Canada has been