The Phillips curve:
a. was relatively well-defined during the 1960s.
b. demonstrates how to achieve stable economic growth.
c. shows the trade-off between deficits and inflation.
d. helps to stimulate entrepreneurial profits.
e. becomes vertical at full employment.
QUESTION 2Suppose hypothetically that you buy a lot of food such as tofu, veggie burgers, and organic fruit that are not included in the market basket used to compute the CPI. In addition, suppose that all of these goods have become cheaper over the last year, while the overall CPI has increased by 6 percent. Then which of the following is true?
a. The CPI will understate the negative impact of inflation on your purchasing power and standard of living.
b. The CPI will still accurately state the negative impact of inflation on your purchasing power and standard of living.
c. The CPI will overstate the negative impact of inflation on your purchasing power and standard of living.
d. None of the answers above are correct.
QUESTION 3The Phillips curve traces a set of combinations of rates of:
a. interest and unemployment.
b. real GDP and inflation.
c. real GDP and interest.
d. inflation and interest.
e. unemployment and inflation.
QUESTION 4Supply-side economists:
a. saw influence beyond in both the Bush and Clinton administrations.
b. disagreed with economist Arthur Laffer's views on taxes.
c. were influential in President Reagan's decision to change the tax structure.
d. believe that government regulations do not reduce productivity and undermine industrial efficiency.
QUESTION 5Which of the following is the largest single component of the market basket used to compute the consumer price index (CPI)?
a. Food and beverages.
b. Housing.
c. Transportation.
d. Medical care.
QUESTION 6According to supply-side economists, lowering corporate income taxes:
a. results in wage hikes for employees but no economic growth.
b. moves society toward greater income equality.
c. checks the expansion of real GDP and employment.
d. stimulates investment and economic growth.
e. does not create enough incentive for producers to increase production.
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