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Quiz 7

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Question 1 (1.0 points)
Many economists now believe that a permanent increase in the price of oil:
  1. will permanently decrease the sum "μ + z" in the Phillips curve equation.
  2. will permanently decrease the natural rate of unemployment.
  3. will permanently decrease the markup in the Phillips curve equation.
  4. all of the above
  5. none of the above
Question 2 (1.0 points)
The original Phillips curve implied that:
  1. the expected inflation rate is equal to last year's inflation rate.
  2. the markup over labor costs is zero.
  3. a lower rate of unemployment causes an increasing rate of inflation.
  4. the inflation would be zero.
  5. none of the above
Question 3 (1.0 points)
Which of the following individuals first discovered the relationship between unemployment and inflation for the United States?
  1. Solow and Friedman
  2. Friedman and Phelps
  3. Samuelson and Solow
  4. Friedman and Phillips
Question 4 (1.0 points)
Suppose policy makers underestimate the natural rate of unemployment. In a situation like this, policy makers might implement a policy that:
  1. results in deflation.
  2. attempts to maintain output below the natural level of output.
  3. both a and b
  4. results in steadily rising inflation.
Question 5 (1.0 points)
As the proportion of labor contracts that index wages to prices declines, we would expect that:
  1. the natural rate of unemployment will increase.
  2. nominal wages will become more sensitive to changes in unemployment.
  3. the natural rate of unemployment will decrease.
  4. a reduction in the unemployment rate will now have a smaller effect on inflation.
Question 6 (1.0 points)
Since the 1970, which of the following has exhibited the most stable relationship?
  1. the unemployment rate and the change in the rate of inflation
  2. the change in the unemployment rate and the change in the rate of inflation
  3. the inverse of the unemployment rate and the rate of inflation
  4. the unemployment rate and the rate of inflation
  5. the rate of inflation and the change in the unemployment rate
Question 7 (1.0 points)
When inflation has not been very persistent, we can expect that:
  1. lower unemployment rates will be associated with higher inflation rates.
  2. expected price level for a given year will equal the previous year's actual price level.
  3. the current inflation rate will not depend heavily on past inflation.
  4. all of the above
  5. none of the above
Question 8 (1.0 points)
When a high proportion of a country's workers have indexed wages, we can expect:
  1. the unemployment rate to be relatively high.
  2. the change in the inflation rate to be less sensitive to the unemployment rate.
  3. the inflation rate to be relatively low.
  4. the unemployment rate to be relatively low.
  5. none of the above
Question 9 (1.0 points)
One explanation for the change in the U.S. natural rate of unemployment during the 1970s was:
  1. contractionary monetary policy.
  2. a reduction in benefits paid to workers by firms.
  3. contractionary fiscal policy.
  4. all of the above
  5. none of the above
Question 10 (1.0 points)
As of 2002, what was the last year that U.S. experienced deflation?
  1. 1973
  2. 1955
  3. 1991
  4. 1933
  5. 1987
Question 11 (1.0 points)
Suppose the Phillips curve is represented by the following equation: π t - π t-1 = 20 - 2u t . Given this information, which of the following is most likely to occur if the actual unemployment in any period is equal to 6%?
  1. The rate of inflation will tend to increase.
  2. The rate of inflation will tend to decrease.
  3. The rate of inflation will be constant.
  4. none of the above
Question 12 (1.0 points)
Which of the following would be most likely to cause a change in the natural rate of unemployment?
  1. a change in the rate of inflation
  2. a change in the composition of jobs
  3. a change in fiscal policy
  4. a change in the price of oil
  5. a change in monetary policy
Question 13 (1.0 points)
If policy makers underestimate the natural rate of unemployment, they may follow policies that cause the U.S. to have:
  1. a dramatically fluctuating unemployment rate.
  2. a higher inflation rate than necessary.
  3. a steadily decreasing inflation rate.
  4. more unemployment than necessary.
  5. an unemployment rate that is "too high."
Question 14 (1.0 points)
Suppose the Phillips curve is represented by the following equation: π t - π t-1 = 20 - 2u t . Given this information, we know that the natural rate of unemployment in this economy is:
  1. 5%.
  2. 10%.
  3. 6.5%.
  4. 20%.
  5. none of the above
Question 15 (1.0 points)
Assume that expected inflation is based on the following: π e t = θπ t-1 . If θ = 1, we know that:
  1. the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate.
  2. a reduction in the unemployment rate will have no effect on inflation.
  3. low rates of unemployment will cause steadily increasing rates of inflation.
  4. the actual unemployment rate will not deviate from the natural rate of unemployment.
Question 16 (1.0 points)
Suppose a worker's nominal wage is indexed. To which of the following variables is the nominal wage most likely indexed?
  1. GDP
  2. unemployment
  3. the average wage in the country
  4. productivity
  5. the price level
Question 17 (1.0 points)
Between 1900 to 1960 the relationship between the U.S. unemployment rate and the U.S. inflation rate was relatively stable except for which of the following years?
  1. 1921 to 1929
  2. 1911 to 1919
  3. 1901 to 1909
  4. 1931 to 1939
  5. none of the above
Question 18 (1.0 points)
Use the following Phillips curve equation to answer this question: π t - π t-1 = (μ + z) - αu t . Which of the following will cause an increase in the natural rate of unemployment?
  1. an increase in actual inflation
  2. a reduction in α
  3. a reduction in z
  4. a reduction in μ
  5. an increase in expected inflation
Question 19 (1.0 points)
Using the Phillips curve equation π t - π t-1 = (μ + z) - αu t , the natural rate of unemployment will equal:
  1. μ + z.
  2. 0.
  3. (μ + z)/α.
  4. (μ + z - α).
  5. a(μ + z).
Question 20 (1.0 points)
Use the following Phillips curve equation to answer this question: π t - π t-1 = (μ + z) - αu t . Which of the following will cause an increase in the natural rate of unemployment?
  1. a reduction in z
  2. a reduction in expected inflation
  3. an increase in μ
  4. an increase in α
  5. none of the above
Question 21 (1.0 points)
An important issue for the Phillips curve is how individuals form expectations of inflation. Which of the following represented a reasonable assumption about what individuals expected the inflation rate to be for the current year by the early 1970s?
  1. smaller than last year's inflation rate
  2. about equal to last year's inflation rate
  3. equal to the average inflation rate over the past ten years
  4. larger than last year's inflation rate
  5. equal to the average inflation rate over the past five years
Question 22 (1.0 points)
The data suggest that in the European Union countries, the natural rate of unemployment:
  1. is now higher than in the U.S.
  2. has become less "natural," since it is now almost entirely determined by the policies of a few large corporations.
  3. will soon exceed the percentage of the labor force that is working.
  4. is no longer a relevant concept.
  5. has steadily declined over the past two decades.
Question 23 (1.0 points)
Assume that expected inflation is based on the following: π e t = θπ t-1 . If θ = 0, we know that:
  1. the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate.
  2. a reduction in the unemployment rate will have no effect on inflation.
  3. low rates of unemployment will cause steadily increasing rates of inflation.
  4. high rates of unemployment will cause steadily declining rates of inflation.
Question 24 (1.0 points)
One explanation for the lower natural rate of unemployment in Japan than in the U.S. is that:
  1. the labor force is defined differently in Japan.
  2. the average worker switches jobs less often in Japan.
  3. the average worker is much younger in Japan.
  4. unemployment is defined differently in Japan.
  5. the average worker lives with several family members in Japan.
Question 25 (1.0 points)
Which of the following individuals first discovered the relationship between unemployment and inflation?
  1. Solow
  2. Friedman
  3. Samuelson
  4. Phillips
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Quiz 7. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/macroeconomics-for-managers/quiz7.htm. This work is licensed under a Creative Commons License Creative Commons License