Economics PS 9

1. According to the sticky-price model, deviations of output from the natural level are _____ deviations of the price level from the expected price level.

Positively associated with

Negatively associated with

Not related to

Equal to

2. According to the sticky-price model, other things being equal, the greater the proportion, s, of firms that follow the sticky-price rule, the the in output in response to an unexpected price increase.

Greater; increase

Smaller; increase

Greater; decrease

Smaller; decrease

3. Both models of aggregate supply discussed in Chapter 12 imply that if the price level is higher than expected, then output ______ natural rate of output.

Exceeds the

Falls below the

Equals the

Moves to a different

4. Use the following to answer questions 15-16: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, if there is an unexpected monetary expansion that shifts aggregate demand from AD₁ to AD₃, then the long-run neutrality of money is represented by the movement from:

A to B.

A to G.

A to C.

A to D.

5. In the sticky-price model, the relationship between output and the price level depends on:

The proportion of firms with flexible prices.

The target real wage rate.

The target nominal wage rate.

The implicit agreements between workers and firms.

6. According to the imperfect-information model, when the price level is greater than the expected price level, output will _____ the natural level of output

Be greater than

Be less than

Equal to

Shift the

7. Each of the two models of short-run aggregate supply is based on some market imperfection. In the sticky-price model, the imperfection is that:

Some firms do not adjust their prices instantly to changes in demand.

Expectations are formed adaptively rather than rationally.

Firms confuse changes in the overall level of prices with changes in relative prices.

The real wage adjusts to bring labor supply and labor demand into equilibrium.

8. The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation:

Exceeds the inflation rate.

Equals the inflation rate.

Is below the inflation rate.

Equals the inflation rate of the previous year.

9. If the short-run aggregate supply curve is steep, the Phillips curve will be:

Flat.

Steep.

Backward-bending.

Unrelated to the slope of the short-run aggregate supply curve.

10. Use the following to answer questions 26-27: (Exhibit: Short-run Phillips Curves) As the short-run Phillips curve shifts from A to B to C to D, policymakers face:

The same tradeoff between inflation and unemployment.

A lower rate of inflation for any level of unemployment.

A higher rate of inflation for any level of unemployment.

Higher than expected inflation rates and lower unemployment rates.

11. Use the following to answer questions 26-27: (Exhibit: Short-run Phillips Curves) As the short-run Phillips curve shifts from A to B to C to D:

The expected rate of inflation is unchanged at every level of unemployment.

There is a lower-expected rate of inflation at every level of unemployment.

There is a higher-expected rate of inflation for every level of unemployment.

The natural rate of unemployment falls.

12. Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

Greater than the expected price level.

Less than the expected price level.

Equal to the natural price level.

Stuck at the existing price level.

13. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, a demand-pull inflation would be represented by a shift from:

AD1 to AD2.

AD1 to AD3.

AS1 to AS2.

AS1 to AS3.

14. Along any aggregate supply curve, there is only one:

Unemployment level.

Expected price level.

Inflation level.

Output level.

15. According to the natural-rate hypothesis, the levels of output and unemployment depend on:

Aggregate demand in the short run, but not in the long run.

Aggregate demand in the long run, but not in the short run.

The natural rate of unemployment in the short run, but the natural rate of inflation in the long run.

The natural rate of inflation in the short run, but the natural rate of unemployment in the long run.

16. Use the following to answer questions 15-16: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, if there is an unexpected monetary expansion that shifts aggregate demand from AD₁ to AD₃, then the short-run nonneutrality of money is represented by the movement from:

A to B.

A to G.

A to C.

A to D.

17. According to the imperfect-information model, when the price level rises and the producer expects the price level to rise, the producer:

Increases production.

Does not change production.

Decreases production.

Hires more workers.

18. According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:

Increases production.

Does not change production.

Decreases production.

Hires more workers.

19. According to the sticky-price model, output will be at the natural level if:

Firms expect a high price level and the demand for goods is high.

The proportion of firms with flexible prices equals the proportion of firms with sticky prices.

The price level equals the expected price level.

Expectations are formed adaptively, but not if expectations are formed rationally

20. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, a cost-push inflation would be represented by a shift from:

AD1 to AD2.

AD1 to AD3.

AS1 to AS2.

AS1 to AS3.

21. Inflation inertia is represented in the aggregate supply and aggregate demand model by continuing upward shifts in the:

Aggregate demand curve.

Short-run aggregate supply curve.

Long-run aggregate supply curve.

Aggregate demand and short-run aggregate supply curves.

22. Based on the Phillips curve, unexpected movements in inflation are related to and based on the short-run aggregate supply curve, unexpected movements in the price level are related to .

Sticky wages; sticky prices

Sticky prices; sticky wages

Output; unemployment

Unemployment; output

23. Which of the following will shift the aggregate supply curve up to the left?

An increase in the price level.

A decrease in the level of output.

An increase in the expected price level.

A decrease in the price level.

24. Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to in the short run, and in the long run the expected price level will , causing the level of output to return to the natural level.

Increase; increase

Increase; decrease

Decrease; decrease

Decrease; increase

Economics Ps 9

1. According to the sticky-price model, deviations of output from the natural level are _____ deviations of the price level from the expected price level.

2.

What first name or nickname would you like us to use?

2. According to the sticky-price model, other things being equal, the greater the proportion, s, of firms that follow the sticky-price rule, the the in output in response to an unexpected price increase.

3. Both models of aggregate supply discussed in Chapter 12 imply that if the price level is higher than expected, then output ______ natural rate of output.

5. In the sticky-price model, the relationship between output and the price level depends on:

6. According to the imperfect-information model, when the price level is greater than the expected price level, output will _____ the natural level of output

7. Each of the two models of short-run aggregate supply is based on some market imperfection. In the sticky-price model, the imperfection is that:

8. The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation:

9. If the short-run aggregate supply curve is steep, the Phillips curve will be:

10. Use the following to answer questions 26-27: (Exhibit: Short-run Phillips Curves) As the short-run Phillips curve shifts from A to B to C to D, policymakers face:

11. Use the following to answer questions 26-27: (Exhibit: Short-run Phillips Curves) As the short-run Phillips curve shifts from A to B to C to D:

12. Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

13. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, a demand-pull inflation would be represented by a shift from:

14. Along any aggregate supply curve, there is only one:

15. According to the natural-rate hypothesis, the levels of output and unemployment depend on:

17. According to the imperfect-information model, when the price level rises and the producer expects the price level to rise, the producer:

18. According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:

19. According to the sticky-price model, output will be at the natural level if:

20. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, a cost-push inflation would be represented by a shift from:

21. Inflation inertia is represented in the aggregate supply and aggregate demand model by continuing upward shifts in the:

22. Based on the Phillips curve, unexpected movements in inflation are related to and based on the short-run aggregate supply curve, unexpected movements in the price level are related to .

23. Which of the following will shift the aggregate supply curve up to the left?

24. Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to in the short run, and in the long run the expected price level will , causing the level of output to return to the natural level.

Economics Ps 9

1. According to the sticky-price model, deviations of output from the natural level are _____ deviations of the price level from the expected price level.

2.

What first name or nickname would you like us to use?

2. According to the sticky-price model, other things being equal, the greater the proportion, s, of firms that follow the sticky-price rule, the ______ the ______ in output in response to an unexpected price increase.

3. Both models of aggregate supply discussed in Chapter 12 imply that if the price level is higher than expected, then output ______ natural rate of output.

5. In the sticky-price model, the relationship between output and the price level depends on:

6. According to the imperfect-information model, when the price level is greater than the expected price level, output will _____ the natural level of output

7. Each of the two models of short-run aggregate supply is based on some market imperfection. In the sticky-price model, the imperfection is that:

8. The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation:

9. If the short-run aggregate supply curve is steep, the Phillips curve will be:

10. Use the following to answer questions 26-27: (Exhibit: Short-run Phillips Curves) As the short-run Phillips curve shifts from A to B to C to D, policymakers face:

11. Use the following to answer questions 26-27: (Exhibit: Short-run Phillips Curves) As the short-run Phillips curve shifts from A to B to C to D:

12. Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

13. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P1, a demand-pull inflation would be represented by a shift from:

14. Along any aggregate supply curve, there is only one:

15. According to the natural-rate hypothesis, the levels of output and unemployment depend on:

17. According to the imperfect-information model, when the price level rises and the producer expects the price level to rise, the producer:

18. According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:

19. According to the sticky-price model, output will be at the natural level if:

20. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P1, a cost-push inflation would be represented by a shift from:

21. Inflation inertia is represented in the aggregate supply and aggregate demand model by continuing upward shifts in the:

22. Based on the Phillips curve, unexpected movements in inflation are related to ______ and based on the short-run aggregate supply curve, unexpected movements in the price level are related to ______.

23. Which of the following will shift the aggregate supply curve up to the left?

24. Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to ______ in the short run, and in the long run the expected price level will ______, causing the level of output to return to the natural level.

2. According to the sticky-price model, other things being equal, the greater the proportion, s, of firms that follow the sticky-price rule, the the in output in response to an unexpected price increase.

13. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, a demand-pull inflation would be represented by a shift from:

20. Use the following to answer questions 23-24: (Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, a cost-push inflation would be represented by a shift from:

22. Based on the Phillips curve, unexpected movements in inflation are related to and based on the short-run aggregate supply curve, unexpected movements in the price level are related to .

24. Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to in the short run, and in the long run the expected price level will , causing the level of output to return to the natural level.