1. During cost-push inflation, aggregate output _______ and the aggregate price level _________.
Answer
Correct Answer:
Falls; rises.
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2. Flat taxation is present when a set rate is applied to _______ levels of income.
Answer
Correct Answer:
All the above
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3. As long as people have different _____, everyone has a comparative advantage in something.
Answer
Correct Answer:
Opportunity costs
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4. Budget deficits automatically __________ during recessions and __________ during expansions.
Answer
Correct Answer:
Increase, decrease
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5. The open market operations of the fomc are the _______________ tool of the fed.
Answer
Correct Answer:
Reserve requirement.
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6. On average, since 1900 u.s. output has grown by roughly ____ percent per year.
Answer
Correct Answer:
3
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7. Structural unemployment usually lasts ________ period of time ________ unemployment
Answer
Correct Answer:
A longer ; than frictional
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8. The ____________________ in an ad/as diagram is most relevant to say?s law.
Answer
Correct Answer:
Steep portion of the AS curve.
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9. A hybrid approach to monetary rules and inflation targeting is known as the ______.
Answer
Correct Answer:
Taylor rule
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10. The financial crisis of 2008 caused a rise in ______.
Answer
Correct Answer:
Unemployment
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11. In 2012, the Fed stated its intent to maintain inflation at an annual rate of ______.
Answer
Correct Answer:
2%
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12. As aggregate demand falls, ______.
Answer
Correct Answer:
Output and employment also fall
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13. Real business cycle theory says that ______.
Answer
Correct Answer:
Economic fluctuations are the result of external negative and positive productivity shocks to the economy
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14. Rational expectations theory says that government fiscal and monetary policy work ______.
Answer
Correct Answer:
Only of the public is surprised
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15. Rational expectations economists believe that ______.
Answer
Correct Answer:
Both wages and prices are flexible
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16. In 2011, Professors Thomas Sargent and Christopher Sims won a Nobel Prize for their work in ______.
Answer
Correct Answer:
Rational expectations theory
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17. During the 1990s, expected inflation was fairly ______.
Answer
Correct Answer:
Low
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18. The sacrifice ratio is considered to be ______.
Answer
Correct Answer:
A rough measure
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19. The idea that the economy’s employment level will self-correct is known as the ______.
Answer
Correct Answer:
Natural rate hypothesis
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20. In the 1960s, policy makers ______ the Phillips curve.
Answer
Correct Answer:
Widely followed
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21. High price stability corresponds with ______.
Answer
Correct Answer:
High unemployment
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22. How do higher prices affect people on fixed incomes?
Answer
Correct Answer:
They decrease their real income.
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23. When real wages drop, unemployment ______.
Answer
Correct Answer:
Decreases
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24. Theory of rational expectations belief that workers and consumers incorporate the likely consequences of government policy changes into their expectations by quickly adjusting wages and prices
Answer
Correct Answer:
True
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25. Real business cycle theory is the belief that economic fluctuations are the result of external negative and positive productivity shocks to the economy
Answer
Correct Answer:
True
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26. A hypothesis that states that the economy will self-correct to the natural rate of employment is called
Answer
Correct Answer:
Natural rate hypothesis
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27. ___ is use of payment contracts that automatically adjust for changes in inflation
Answer
Correct Answer:
Indexing
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28. An individual’s belief that the best indicator of the future is recent information on inflation and unemployment is adaptive expectations
Answer
Correct Answer:
True
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