Suppose the economy had been operating along a given short-run Phillips curve for several years and then experienced a year of stagflation. The year of stagflation would:
a. be represented as a move upward along the short-run Phillips curve.
b. be represented as a move downward along the short-run Phillips curve.
c. be represented as a point above the short-run Phillips curve.
d. be represented as a point below the short-run Phillips curve.
e. correspond to the origin.
QUESTION 2The inflation associated with the oil embargoes of the 1970s resulted in:
a. reduced unemployment because aggregate demand increased.
b. reduced unemployment because aggregate demand fell.
c. increased unemployment because aggregate demand increased.
d. increased unemployment because aggregate demand fell.
e. increased unemployment because aggregate supply fell.
QUESTION 3The inflation associated with the oil embargoes of the 1970s illustrated the _____ of the downward-sloping Phillips curve in the long run, as unemployment _____ during this period.
a. validity; fell
b. validity; rose
c. fallacy; rose
d. fallacy; fell
e. fallacy; did not change
QUESTION 4Economist Alban William Phillips believed that:
a. the Fed should follow a policy rule because it does not know the lag structure.
b. the Fed should follow a policy rule to avoid monetary surprises.
c. there is an inverse relationship between inflation and unemployment.
d. private sector spending is inherently unstable.
e. government spending is inherently unstable.
QUESTION 5The immediate effects of a discretionary increase in government spending are represented by a:
a. rightward shift of the aggregate demand curve.
b. leftward shift of the aggregate demand curve.
c. rightward shift of the Phillips curve.
d. leftward shift of the Phillips curve.
e. movement along the Phillips curve.