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Exam 9: An Introduction to the Short Run

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Question 41

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The short-run model determines ________ and ________.

A) current output; current inflation
B) current output; long-run inflation
C) unemployment; current inflation
D) unemployment; potential output
E) potential output; unemployment

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Question 42

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Yale professor Ray Fair's presidential prediction model uses ________ and has ________.

A) macroeconomic variables; been unsuccessful since the Reagan administration
B) macroeconomic variables; predicted 10 of the past 14 presidential races
C) Okun's law; predicted the expected rate of inflation
D) unemployment;only predicted 2 of the last 12 Senate compositions
E) a theoretical model; confirmed the results of Dr. Duncan Black's median voter theory

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Question 43

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New technology, oil price changes, pork-barrel spending, interest rate changes, changes in planned investment, and disasters are examples of:

The relationship between actual output in an economy, the long-run component, and the short-run component is given as Current output =Long-run trend+ Short-run fluctuations.

The long-run model determines ________ output and ________.

Refer to the following figure to answer the following questions. Figure 9.3: Percent Change in U.S. Employment: 1980-2015 -Based on the data presented in Figure 9.3, which of the following periods is/are likely (a) recession(s) ?

Since 1950, economic fluctuations in the United States (i.e., the output gap) have generally been in the ________ percent to ________ percent range.

Defining as current output, and As potential output, how can the equation Be best defined?

Defining as current output, As potential output, and As short-run fluctuations, which of the following equations is correct?

Suppose an economy exhibits a large unexpected decrease in productivity growth that lasts for a decade; however, monetary policymakers are slow to recognize that the change is to potential-not current-output and they interpret the decrease in output as a recession that leads current output to fall below potential output. In this scenario, policymakers believe that recessionary pressures are building and incorrectly respond by increasing interest rates, sending the economy into a recessionary gap.

One implication of the Keynes quote, "In the long run we are all dead," is that:

Which of the following is NOT an example of a short-term macroeconomic shock?

Since 1970, for the U.S. economy, the largest negative output gap occurred during the recession of ________; however, the largest percentage drop in employment was during the recession of ________.

The Great Depression stimulated ________ to write ________, which is considered to be the birth of modern macroeconomics.

What does the Phillips curve represent?

Generally speaking, the rate of inflation rises during a recession.

Defining as current output, As potential output, and As short-run fluctuations, which of the following equations is correct?

Figure 9.7: The Output Gap 1980-2015 (Source: Federal Reserve Economic Data, St. Louis Federal Reserve) -Figure 9.7 above shows the output gap for the years 1960-2015. Using the Phillips curve and Okun's law, discuss the impacts on inflation and unemployment for the years 1997-2000 and 2008-2015. From this analysis, what is the relationship between unemployment and inflation?

If , the macroeconomy is:

According to the Phillips curve, short-term changes in inflation are due to changes in: