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King: Economics

Chapter 23

Instructions

Answer the following questions and then press 'Submit' to get your score.

Question 1

Which of the following statements are true?

1. For cost increases to lead to sustained inflation, there must be persistent rises in costs followed by persistent government efforts to return output to its potential level.
2. For cost increases to lead to sustained inflation, there must be persistent rises in costs coupled with wage flexibility that always returns the labour market to equilibrium.
3. For demand increases to lead to sustained inflation, there must be persistent increases in demand followed by persistent government efforts to return output to its potential level.
4. For demand increases to lead to sustained inflation, there must be persistent increases in demand coupled with wage flexibility that always returns the labour market to equilibrium.

Question 2

Which of the following statements about the UK is false?

Question 3

Suppose inflation over the next year is expected to be 5%, and assume there are no supply shocks. What rate of inflation will the short-run Phillips curve show at the natural rate of unemployment?

Question 4

Which of the following explains why the long-run Phillips curve is drawn as a vertical line?

Question 5

Which of the following might shift the short-run Phillips curve to the left?

Question 6

Which of the following would shift the long-run Phillips curve to the left?

Question 7

Which of the following views is not characteristic of the monetarist approach to policies regarding unemployment and inflation?

Question 8

Which of the following statements about rational expectations is false?

Question 9

Suppose the labour market is away from equilibrium, with unemployment above the natural rate. The new Keynesian view of inflation and unemployment offers several reasons why the labour market can stay away from equilibrium for long periods. Which of the following is not one of these reasons?

Question 10

Suppose a government instructs its central bank to operate a Taylor rule, and that the government sets a credible inflation target. Which of the following statements is false?