1.Given the accelerationist Phillips curve = - 0.3 (U - 6) + , suppose that inflation in the preceding period was 3 percent, unemployment is 7 percent, and there is no price shock. The current inflation rate is ________.
A. 2.7 percent
B. 3 percent
C. 0.9 percent
D. 3.3 percent
E. None of these
2.If expectations about inflation are adaptive, they are ________.
A. not based on all available, relevant information
B. backward-looking
C. likely to change slowly
D. All of these
E. None of these
3.________ is (are) the endogenous variable(s) in the Phillips curve.
A. Expected inflation
B. Inflation
C. The natural rate of unemployment
D. All of these
E. None of these
4.If expectations about inflation are adaptive, they are ________.
A. formed by looking at the future
B. likely to change rapidly
C. based on past inflation
D. All of these
E. None of these
5.An example of a price shock is ________.
A. an increase in wages as a result of higher expected inflation
B. the arrival of immigrants seeking employment
C. the decline in autonomous spending that results from rising unemployment
D. All of these
E. None of these
6.The idea behind the Phillips curve is that ________.
A. tightness in the labor market puts downward pressures on wages and prices
B when the unemployment rate is low wages will increase
C. when firms raise wages to attract new workers, prices decrease
D. All of these
E. None of these
7. The Phillips curve was ________.
A. never very popular in policy circles
B. influential in efforts to bring the unemployment rate down to low levels
C. generally confirmed in the 1970s, when low unemployment persisted despite rising inflation
D. All of these
E. None of these
8.When a price shock occurs, the inflation rate is affected ________.
A. only in the period of the price shock
B. only in the period after the price shock
C. only if the price shock causes a change in output
D. only if the price shock persists for more than one period
E. None of these
9. In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy. Many refineries went offline disrupting oil refining and distribution. What do you think was a likely result?
A. the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right
B. the restricted supply constituted a cost push shock that would have shifted the short run AS curve to the left
C. the restricted supply constituted a cost push shock that would have meant an upward movement along the Phillips curve
D. All of these
E. None of these