SOLVED

1) In the long run ________. A) the amount of output an economy can produce is determined by real variables like capital, labor and technological advances B) aggregate supply is fixed at the potential level of output C) there is enough time for prices to fully adjust so the classical dichotomy holds D) all of the above E) none of the above 2) In the long run ________. A) the aggregate supply is vertical with respect to output B) the Phillips curve is vertical with respect to unemployment C) fluctuations in the inflation rate have no impact on output and unemployment D) all of the above E) none of the above 3) In the long run ________. A) the aggregate supply is vertical with respect to unemployment B) the Phillips curve is vertical at a given level of expected inflation C) the economy reaches the potential output level consistent with the natural rate of unemployment D) all of the above E) none of the above 4) The natural rate of output is ________. A) independent of the inflation rate B) always lower than potential output C) unrelated to the natural rate of unemployment D) all of the above E) none of the above 5) When wages and prices are completely flexible ________. A) inflation is determined by expected inflation and price shocks B) labor hoarding occurs C) unemployment is disconnected from the real economy D) all of the above E) none of the above 6) Which of the following shows a negative relationship between the output and unemployment gaps? A) the AS curve B) the Phillips curve C) Okun’s law D) the classical dichotomy E) none of the above 7) Which of the following never assumes, either implicitly or explicitly, independence between nominal and real variables? A) the AS curve B) the Phillips curve C) Okun’s law D) the classical dichotomy E) none of the above 8) Which of the following best approximates Okun’s law? A) a 1 percent increase in output leads to a 2 percent decrease in unemployment B) a 1 percent increase in output leads to a 1 percent decrease in unemployment C) a 2 percent increase in output leads to a 4 percent increase in unemployment D) a 2 percent increase in output leads to a 1 percent decrease in unemployment E) none of the above 9) According to Okun’s law, an increase in which of the following is associated with an increase in unemployment? A) inflation B) output C) expected inflation D) autonomous expenditure E) potential output 10) Which of the following is true in regards to Okun’s law? A) employment does not increase commensurately with output rises because firms tend to hoard labor B) when demand increases, firms tend to work their employees harder and longer C) it is Okun’s prediction of the negative relationship between the output and unemployment gaps that allows the modern Phillips curve to be translated into the AS curve D) all of the above E) none of the above