Question 1

What are some of the possible ways in which we could reduce the natural rate of unemployment?

Accepted Answer

The answer of What are some of the possible ways...

Question 2

What is the effect of supply-side inflation on the short-run Phillips curve?

Accepted Answer

The answer of What is the effect of supply-side inflation...

Question 3

At one time, policymakers interpreted the Phillips curve as offering a menu of inflation-unemployment choices.Today, the curve is no longer viewed this way.Why has the interpretation changed?

Accepted Answer

The answer of At one time, policymakers interpreted the Phillips...

Question 4

The most extensive indexing in the United States is in

Accepted Answer

Government transfer payments, including Social Security benefits, represent a large and consistent portion of the U.S. economy. As such, they are often used as a benchmark for indexing other economic factors, such as cost of living adjustments for wages and salaries.

Question 5

If you believe that expectations react slowly, you are likely

Accepted Answer

This is a characteristic of Keynesian economics, which holds that expectations can be slow to adjust and can have a significant impact on economic behavior. Rational expectations theory, on the other hand, holds that expectations are generally quickly incorporated into economic decision-making. The term "theoretical economist" is too broad and could apply to multiple economic schools of thought.

Question 6

Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?

Accepted Answer

The answer of Who gains if inflation turns out to...

Question 7

In the 1970s, why did the short-run Phillips curve fail to depict the unemployment-inflation trade-off?

Accepted Answer

The answer of In the 1970s, why did the short-run...

Question 8

What reasons would economists give for an increase in the natural rate of unemployment that could have occurred from 2007 to 2011? What argument would suggest that the natural rate of unemployment may not have risen?

Accepted Answer

The answer of What reasons would economists give for an...

Question 9

If the income tax system were indexed, a person whose nominal income went up from $30,000 to $33,000 in a year when the price index rose by 10 percent would pay

Accepted Answer

If the income tax system were indexed to the price index, the tax bracket for a person earning $30,000 would be adjusted for inflation to reflect the increased cost of living. Therefore, if the price index rose by 10%, the threshold for each tax bracket would also increase by the same amount. So, a person whose nominal income went up from $30,000 to $33,000 would still fall within the same tax bracket and pay the same amount of real income taxes. Thus, there would be no increase in real income taxes.

Question 10

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

Accepted Answer

The answer of Describe three arguments of why some economists...

Question 11

Opponents of indexing fear that it will lead to a(n)

Accepted Answer

Indexing can lead to an acceleration of inflation because it automatically adjusts wages, taxes, and other financial elements to the inflation rate, potentially creating a cycle where inflation perpetuates itself.

Question 12

Some economists argue that there is no such thing as a short-run Phillips curve.Who are these economists and what is their argument?

Accepted Answer

The answer of Some economists argue that there is no...

Question 13

Some of the promising approaches to reducing the natural rate of unemployment have to do with education, training, and job placement.What implementation problems do you anticipate?

Accepted Answer

The answer of Some of the promising approaches to reducing...

Question 14

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well.How does economic theory explain this apparent violation of the Phillips curve model?

Accepted Answer

The answer of The period from the late 1990s to...

Question 15

The intent of indexing is to

Accepted Answer

The intent of indexing is to take most of the sting out of inflation by automatically adjusting wages, prices, and/or taxes to keep up with the rate of inflation. This helps to prevent a decrease in purchasing power and reduces the negative impact of inflation on individuals and the overall economy. It does not directly raise tax revenue or shift the short-run Phillips curve, nor does it necessarily reduce inflation gradually.

Question 16

The economy's self-correcting mechanism tends to push the unemployment rate back to a specific rate of unemployment.How?

Accepted Answer

The answer of The economy's self-correcting mechanism tends to push...

Question 17

When inflation comes from the supply side, inflation and unemployment are positively correlated.Does this mean that monetary and fiscal policymakers can escape the trade-off between inflation and unemployment?

Accepted Answer

The answer of When inflation comes from the supply side,...

Question 18

If you believe that expectations react quickly, you are likely a

Accepted Answer

The belief that expectations react quickly is a key principle of the rational expectations theory in economics, which holds that individuals use all available information to form expectations about the future, including information about government policies and other economic conditions.

Quiz 33: The Trade-Off Between Inflation and Unemployment