Week 12 Quiz

Which statement is a normative claim rather than a positive one?

Select one.

• Along one short-run Phillips curve, lower unemployment comes with higher inflation.
• A central bank ought to accept higher unemployment to end inflation quickly.
• In the long run, unemployment returns to the natural rate whatever the inflation rate.
• With velocity and real output fixed, a 10% rise in money raises prices 10%.

In the course's illustrative economy, one short-run Phillips curve passes through (u = 4%, π = 6%) and (u = 6%, π = 2%). What is the slope of the curve between these points, in points of inflation per point of unemployment?

Select one.

• −2
• 2
• −0.5
• 4

The natural rate of unemployment is made up of which kinds of unemployment?

Select one.

• Cyclical unemployment only
• Frictional plus cyclical unemployment
• Frictional plus structural unemployment
• Frictional, structural, and cyclical unemployment

In the course's illustrative economy, the short-run points are (u = 4%, π = 6%) and (u = 6%, π = 2%), and the natural rate sits midway between them. Which line is the long-run Phillips curve?

Select one.

• A downward-sloping line through both short-run points
• A horizontal line at 6% inflation
• A vertical line at 4% unemployment
• A vertical line at 5% unemployment

Policy holds unemployment at 4% in the course's illustrative economy, which buys 6% inflation on the original short-run curve. The natural rate is 5%. Once workers and firms come to expect 6% inflation, where does the economy settle?

Select one.

• At 4% unemployment and 6% inflation, for good
• At 5% unemployment and 6% inflation
• At 6% unemployment and 2% inflation
• At 5% unemployment and 2% inflation

True or false: on the Phillips curve diagram, the unemployment rate runs along the horizontal axis, the inflation rate runs up the vertical axis, and the short-run curve slopes down.

True or false.

• True
• False

In the course's illustrative quantity equation, the money supply is M = 500, velocity is V = 4, and real output is Q = 1,000. What is the price level P?

Select one.

• 0.5
• 8
• 2
• 20

Starting from M = 500, V = 4, and Q = 1,000, the money supply rises 10% to 550 while velocity and real output stay fixed. What is the new price level?

Select one.

• 2.2
• 2
• 4.4
• 2.1

In the course's illustrative economy, money grows 8% a year and real output grows 3% a year, with velocity stable. About what inflation rate does the approximation give?

Select one.

• 11%
• 8%
• 3%
• 5%

The inflation rate on the vertical axis of the Phillips curve measures which of these?

Select one.

• The level of the Consumer Price Index in a given year
• The percentage change in a price index from one period to the next
• The difference between two index levels, in index points
• The price level P in the quantity equation