Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 18, Problem 8RQ
To determine
Impact of adverse aggregate supply shock on the inflation rate and unemployment rate.
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3. The long-run effects of monetary policy
The following graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate
supply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LAPC and SRPC, respectively).
PRICE LEVEL
1
LRAS
3
OUTPUT (Trillions of dollars)
AD
AD
10
LRAS
(?)
QUESTION 43
If the population of a country is 1,000,000 people, its labor force consists of 500,000, and 40,000 people are unemployed, the
unemployment rate is:
O 50.0 percent.
8.0 percent.
7.4 percent.
4.0 percent.
QUESTION 44
Inflation is defined as:
The level of prices at full-employment.
An increase in the price of expensive items, such as cars.
An increase in the average level of prices.
An increase in relative prices.
QUESTION 45
Over time, U.S. real GDP has increased:
By small, constant increments.
At a constant geometric rate.
At an average rate of 3 percent per year.
At an average rate of 7 percent per year.
Suppose that the actual unemployment rate in a country is 7.7
percent. If the country's frictional unemployment rate is 3.5
percent and its structural unemployment rate is 1.1 percent, what
is its cyclical unemployment rate?
O 11.7 percent
O 3.1 percent
O 5.3 percent
O 4.1 percent
۵
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- Assume that the Phillips curve equation is represented by π = +0.1 - 2ut where π = 0-1. Suppose that 0 = 1 and the inflation rate is ₁ = 3% at t = 1. What is the actual rate of inflation for t = 3 if the government maintains an unemployment rate of 3% each period? O 11% O 3% O 15% 5% O 7%arrow_forwardAssume that John has a car loan with a nominal interest rate of 4%. If the actual inflation rate is 3%, then the real rate is 3% 4% O 7% O 1%arrow_forwardQuestion Completion Status: A Moving to another question will save this response. estion 15 Phillips Curve shows possible combinations of the Unemployment rate inflation rate Wage Rate Income Level A Moving to another question will save this response. bike 2.jpg bike.jpg 101°F Sunny Q ? (a 12 2 33 # 3 E IOI $ 4 and the S R % bike 2 LO 5 74 16 T [Select ALL that apply] 6 & bike jpg. 18 7 Yarrow_forward
- The previous year had an unemployment rate of 14.1%, nominal GDP of $28.9 trillion, and real GDP of $26.1 trillion. If the unemployment rate changes to 18.6% and overall price levels remain constant, which choice below could be the current year nominal GDP? O $39.3 trillion O $39.2 trillion $39.1 trillion O $28.0 trillionarrow_forward"If the consumer price index was 102 in the base year and 117 in the following year, the inflation rate was" O 15 percent. 14.7 percent. 7 percent. O 1.07 percent.arrow_forwardWhich of the following statements is TRUE regarding the Fisher Effect? O A. The Fisher Effect illustrates the inverse relationship between inflation and nominal interest rates. O B. Nominal interest rates are directly related to expected inflation in part because borrowers want to protect their purchasing power reward from being wiped out by lower inflation. O c. If prices rise by 7% and your salary increases by 9%, you will experience a gain of purchasing power. O D. Ceteris paribus, the higher the inflation, the higher the real interest rate.arrow_forward
- Moving to another question will save this response. estion 10 Cold Turkey policy is believed to be the most inefficient anti-inflation policy. TRUE or FALSe? O TRUE FALSE Moving to another question will save this response. #bike 2 bike 2.jpg bike.jpg 101°F Sunny esc fi # 3 14 ID LA 4 % LO 5 6arrow_forwardWhich of the following would impose the greatest costs to society? TO a. stable rates of inflation lO b. variable rates of inflation IO c. low levels of expected inflation PO d. high levels of expected inflationarrow_forwardRemaining Time: 16 minutes, 20 seconds. Question Completion Status: A Moving to another question will save this response. Question 15 Phillips Curve shows possible combinations of the Unemployment rate inflation rate Wage Rate Income Level bike.jpg * 3 Sc bike 2.jpg 96°F Clear 1 ? Q f2 @ 2 34 # E f4 0 $ 4 and the % R bike 2 LO 5 40 T [Select ALL that apply] 6 G & bike jpg. ❖ 7 Yarrow_forward
- Demand-pull inflation is caused by an increase in aggregate demand to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point beyond full employment. a decrease in short-run aggregate supply to an equilibrium point below full employment. O a decrease in short-run aggregate supply to an equilibrium point beyond full employment. Cost-push inflation is caused by O a decrease in short-run aggregate supply to an equilibrium point beyond full employment. O a decrease in short-run aggregate supply to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point beyond full employment.arrow_forwardQuestion 2 The GDP deflator in year 4 is 120 and the GDP deflator in year 5 is 130. The rate of inflation between years 4 and 5 is O -10%. O 7.7%. O 8.33%. O 10%.arrow_forwardIn an economy with high unemployment, the central bank has room to decrease the interest rate. Policy makers might consider lowering interest rates if the current rate of unemployment is V the natural rate of unemployment. All of the following are factors that could hinder the effectiveness of decreasing the interest rate in the face of an unemployment rate significantly higher than the natural rate of unemployment except O A. long term rates that closely follow short term rates. O B. interest rates near zero. O c. projected prolonged effect on the J-curve. O D. large diversity econometric predictions.arrow_forward
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