[Solved] What Is a "Structural" Relationship

Figure 13.1 Alt text for Figure 13.1: In figure 13.1, a short-run Phillips curve. Long description for Figure 13.1: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, Philips curve, begins at the top left corner and slopes down to the end of the x-axis.Point A is plotted half way along the line.Point B is plotted to the right of point A.Point C is plotted is to the left of point A.Point D is plotted above this line, in the left center of the quadrant.Point E is plotted below this line, directly beneath point A. -Refer to Figure 13.1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate.If the economy was to move to point C, which of the following must be true? A)The economy is producing a level of GDP equal to potential GDP. B)Aggregate demand must have decreased. C)Equilibrium GDP at point C must be above potential GDP. D)The Bank of Canada conducted contractionary policy to cause the move. E)The Bank of Canada sold Canada bonds to cause the move.

According to the short-run Phillips curve, if unemployment is 3.2% and inflation is 1.3%, an increase in the inflation rate might result in which of the following? A)an increase in the unemployment rate to 3.4% B)a decrease in the unemployment rate to 3.0% C)a decrease in the demand for labour in the economy D)a return to the original inflation rate of 1.3% E)permanently higher inflation and an unemployment rate of 3.2%

Which of the following best explains the negative slope of the short-run Phillips curve? A)Weak growth in aggregate demand keeps the economy below potential GDP, so unemployment rises but the rate of inflation falls. B)Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. C)Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. D)Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change. E)Strong growth in technology causes the short-run aggregate supply curve to shift rightward faster than aggregate demand, so unemployment falls and the inflation rate falls.

If the Phillips curve represents a "structural relationship," then A)the trade-off between unemployment and inflation is permanent. B)the trade-off between unemployment and inflation holds only for the short run. C)the trade-off between unemployment and inflation holds in the long run, but not in the short run. D)the Phillips curve will be vertical in the long run. E)there will be no trade-off between unemployment and inflation.

According to the short-run Phillips curve, which of the following would result in low rates of unemployment? A)weak increases in aggregate supply B)a lower inflation rate C)weak increases in aggregate demand D)a higher inflation rate E)strong increases in long-run aggregate supply

What is the natural rate of unemployment? A)the unemployment rate that exists when the economy is at potential GDP B)the unemployment rate that exists when the economy is at a trough in a business cycle C)an unemployment rate of 0% D)any unemployment rate that is above the inflation rate E)when only cyclical unemployment exists

In the long run, the Phillips curve is a ________ at ________. A)horizontal line; 0% inflation B)negatively sloped line; the intersection of aggregate demand and short-run aggregate supply C)vertical line; the natural rate of unemployment D)vertical line; the expected rate of inflation E)positively sloped line; the current rate of GDP growth

Employees at the university have negotiated a 5 percent increase in wages for the next year, based on their inflation expectations.If inflation is actually 4 percent over the next year, which of the following will occur? A)Unemployment of university employees will fall. B)Real wages for university employees will rise. C)Inflation will be 5 percent the following year. D)The decrease in inflation is expected. E)Employees of the university will be worse off than they expected.

Employees at the university have negotiated a 5 percent increase in wages for the next year, based on their inflation expectations.If inflation is actually 6 percent over the next year, which of the following will occur? A)Unemployment of university employees will rise. B)Real wages for university employees will fall. C)Inflation will be 5 percent the following year. D)The increase in inflation is expected. E)Employees of the university will be better off than they expected.

If actual inflation is less than expected inflation, which of the following will be true? A)Real wages will rise. B)Real wages will fall. C)The Phillips curve will be a vertical line. D)The unemployment rate will fall. E)The aggregate demand curve will become steeper.