Question :
91) The Phillips curve originally appeared to demonstrate a trade-off : 1384486
91) The Phillips curve originally appeared to demonstrate a trade-off between inflation and unemployment. This was later thought to be deficient because
A) it was later recognized that inflation and unemployment were unrelated.
B) the influence on aggregate demand had not been incorporated.
C) changes in unemployment had not been incorporated.
D) the effects of fiscal policy on aggregate demand had not been incorporated.
E) inflationary expectations had not been incorporated.
92) The idea that, in the long run, the Phillips curve is vertical, implying no trade-off between inflation and unemployment, is based on the premise that
A) inflation and unemployment are unrelated.
B) expectations do not adjust to reflect actual inflation.
C) changes in unemployment do not influence real GDP.
D) inflationary expectations fully adjust to actual inflation.
E) inflationary expectations do not influence inflation.
93) Refer to Figure 30-4, part (i). The elimination of the inflationary gap would normally be initiated by
A) workers accepting a reduction in their wage growth.
B) an increase in the productivity of workers.
C) the Bank of Canada engaging in an expansionary monetary policy.
D) the Bank of Canada stopping the ongoing monetary expansion.
E) the government engaging in tax cuts and increasing transfer payments.
94) Refer to Figure 30-4, part (ii). The upward shift of the AS curve in Phase 2 is normally caused by
A) workers accepting a reduction in their wages.
B) an increase in the productivity of workers.
C) the Bank of Canada engaging in an expansionary monetary policy.
D) an increase in the unemployment rate.
E) inflationary expectations that cause wages to continue rising.
95) Refer to Figure 30-4, part (iii). The movement of the economy from E3 to E4 in Phase 3 is often caused by
A) workers accepting a reduction in their wages.
B) an increase in the productivity of workers.
C) the Bank of Canada implementing an expansionary monetary policy.
D) an increase in the unemployment rate.
E) inflationary expectations that cause wages to continue rising.
96) Refer to Figure 30-4, part (ii). If the AS curve continues to drift upward during Phase 2 of the disinflation process, the economy will experience
A) falling unemployment and rising output.
B) falling real wages and factor prices and falling unemployment.
C) rising real wages and factor prices and rising employment.
D) rising unemployment and falling output.
E) a falling price level and falling output.
97) Refer to Figure 30-4, part (ii), Phase 2 of the disinflation process. The upward drift of the AS curve will generally continue longer, with rising unemployment and falling output, when
A) real wages and other factor prices are falling.
B) the price level is falling as a result of the disinflation.
C) firms and consumers regard the central bank’s disinflation policy as highly credible.
D) the central bank pursues a contractionary monetary policy even more severe than they had announced.
E) firms and consumers do not regard the central bank’s disinflation policy as credible.
98) Refer to Figure 30-4, part (iii). Consider the recovery phase of the disinflation process when output is returning from to Y*. Real GDP can return to potential either by ________, or by ________.
A) the AS curve falling slowly back to ; further monetary contraction which shifts the AD curve to
B) the AS curve falling slowly back to ; a monetary expansion which shifts the AD curve to
C) fiscal policy which causes the AS curve to shift back to ; a monetary expansion which shifts the AD curve to
D) legislating a wage-and-price freeze which shifts the AS curve back to ; a further contraction of monetary policy which shifts the AD curve to
E) the AS curve drifting upward to ; the AD curve drifting back to
99) Refer to Figure 30-4, part (iii). Consider the recovery phase of the disinflation process. The disadvantage of implementing an expansionary monetary policy to shift equilibrium from to is
A) the likelihood of entering a deflationary phase.
B) that since expected inflation has been eliminated, real wages will not adjust to any further AD or AS shocks.
C) a falling price level.
D) firms and consumers will no longer respond to decreases in interest rates.
E) the danger of reviving expected inflation, and having to repeat the phases of the disinflation.
100) Refer to Figure 30-4, part (ii) or (iii). The movement of the economy from E3 to E2 could be due to
A) a slow fall in wages due to a recessionary gap.
B) an expansionary monetary policy.
C) a contractionary monetary policy.
D) a rise in unit costs caused by falling wages.
E) a positive aggregate demand shock.
