Answers to questions can be found in answers section.

  1. Inflation is defined as
    1. the percentage change in a price index.
    2. the rate of increase of consumer prices.
    3. the rate of increase of business prices.
    4. the rate of increase of wages.
  1. Inflation would be less of a problem if it was
    1. very high.
    2. highly variable.
    3. indexed.
    4. unexpected.
  1. The unemployment rate measures the number of unemployed person as a percent of
    1. the population.
    2. the labor force.
    3. the employed.
    4. the output gap.
  1. High unemployment is generally a sign of
    1. low inflation.
    2. inefficiency.
    3. prosperity.
    4. voluntary leisure.
  1. The ideal unemployment rate is one that
    1. equals zero.
    2. equals 3%.
    3. equals the inflation rate.
    4. keeps the inflation rate low.
  1. NAIRU is
    1. the name of a former ruler of India.
    2. the name of a former ruler of Indiana.
    3. a rate of unemployment.
    4. a rate of inflation.
  1. If the inflation rate is accelerating, then the actual unemployment rate is probably
    1. higher than NAIRU.
    2. equal to NAIRU.
    3. less than NAIRU.
    4. on vacation in Havana.
  1. The downward slope of the Phillips Curve is used to show the impact of changes in
    1. aggregate demand.
    2. aggregate supply.
    3. inflationary expectations.
    4. NAIRU.
  1. If the actual unemployment rate is above NAIRU, then
    1. actual output is above potential output.
    2. actual output is equal to potential output.
    3. actual output is below potential output.
    4. actual output is on vacation in Havana.
  1. The Phillips curve will shift inward if
    1. inflationary expectations increase.
    2. NAIRU decreases.
    3. actual unemployment decreases.
    4. actual inflation decreases.
  1. The Phillips curve will shift outward if
    1. inflationary expectations increase.
    2. inflationary expectations decrease.
    3. aggregate demand decreases.
    4. aggregate supply increases.
  1. The intent of a supply-side policy would be to
    1. increase NAIRU.
    2. decrease NAIRU.
    3. increase aggregate demand.
    4. raise inflation.
  1. One limitation of supply-side policy is
    1. it is not controlled by the Fed.
    2. it looks like corporate welfare.
    3. history suggests it has large, unpredictable effects.
    4. most voters are right-wingers.
  1. With respect to high inflation, indexing refers to
    1. adjusting incomes to keep up with inflation.
    2. the inefficiencies caused by inflation.
    3. the GDP deflator but not the CPI.
    4. German drinking songs.
  1. The ideal unemployment rate is equal to
    1. zero.
    2. NAIRU.
    3. zero plus discouraged workers.
    4. 4%.
  1. Aggregate demand shocks directly cause
    1. movements along a given Phillips Curve.
    2. leftward and rightward shifts of the Phillips Curve.
    3. changes in inflation but not unemployment.
    4. changes in unemployment but not inflation.
  1. If business costs rise relative to productivity, one would expect
    1. the Phillips Curve to shift left.
    2. the Phillips Curve to shift right.
    3. a rise in inflation and a reduction in unemployment.
    4. a rise in unemployment and a reduction in inflation.
  1. In the late 1990s analysts in the U.S. began to see inflation as a symmetrical problem.  That means that they worried equally about inflation and
    1. hyperinflation.
    2. unemployment.
    3. NAIRU.
    4. deflation