Question : 14.4   The Short-Run Relationship Between the Unemployment Rate and Inflation 1) : 1381205

14.4   The Short-Run Relationship Between the Unemployment Rate and Inflation

1) Other things equal, the unemployment rate rises if

A) the demand for labor increases.

B) aggregate output increases.

C) the supply of labor increases.

D) aggregate demand increases.

2) What sequence of events results from a decrease in aggregate demand?

A) The price level falls, inventories decline, firms respond by increasing output and employment.

B) The price level falls, inventories increase, firms respond by reducing output and employment.

C) The price level rises, inventories decline, firms respond by increasing output and employment.

D) The price level rises, inventories increase, firms respond by increasing output and employment.

3) What sequence of events results from an increase in aggregate demand?

A) The price level falls, inventories decline, firms respond by increasing output and employment.

B) The price level falls, inventories increase, firms respond by reducing output and employment.

C) The price level rises, inventories decline, firms respond by increasing output and employment.

D) The price level rises, inventories increase, firms respond by increasing output and employment.

Refer to the information provided in Figure 14.5 below to answer the questions that follow.

Figure 14.5

4) Refer to Figure 14.5. If aggregate demand shifts while aggregate supply is stable, the relationship between the price level and the unemployment rate is represented in Panel

A) A.

B) B.

C) C.

D) D.

5) As the unemployment rate increases in response to the economy moving away from capacity output, the aggregate price level

A) is stable.

B) falls.

C) rises at an increasing rate.

D) rises at a declining rate.

6) If aggregate demand changes while aggregate supply is stable, output and the unemployment rate are

A) positively related.

B) not related in the short run.

C) not related neither in the long run nor in the short run.

D) negatively related.

7) If the aggregate supply is vertical, an (a) ________ in the price level ________ unemployment rate.

A) decrease; increases

B) increase; doesn’t change

C) decrease; decreases

D) increase; increases

8) Changes in the price level don’t affect the unemployment rate if

A) the economy is operating below capacity.

B) the economy is operating at capacity.

C) the aggregate supply curve is flat.

D) the aggregate demand curve is steep.

9) The Phillips curve depicts the relationship between

A) output and the price level.

B) aggregate demand and aggregate expenditures.

C) inflation and unemployment.

D) money supply and interest rates.

Refer to the information provided in Figure 14.6 below to answer the questions that follow.

Figure 14.6

10) Refer to Figure 14.6. Assuming all shocks to the economy arise from demand changes, which panel represents the short-run relationship between output and the price level?

A) A

B) B

C) C

D) D