Escolar Documentos
Profissional Documentos
Cultura Documentos
a) An increase in costs
Inflation:
An increase in aggregate demand is more likely to lead to demand pull inflation if:
In the short run unemployment may fall below the natural rate of unemployment if:
According to the Phillips curve unemployment will return to the natural rate when:
The Phillips curve shows the relationship between inflation and what?
d) Unemployment
Answers
Question 1
Your Answer:
d) An outward shift in aggregate supply
Correct Answer:
b) A reduction in interest rate
Feedback:
Lower interest rates are likely to encourage spending and this can cause demand pull
inflation.
Question 2
Inflation:
Your Answer:
d) Reduces the purchasing power of a pound
Feedback:
Inflation increases the costs of living.
Question 3
Your Answer:
c) An outward shift of aggregate supply and demand pull inflation
Correct Answer:
a) An outward shift of aggregate demand and demand pull inflation
Feedback:
An increase in injections leads to an increase in aggregate demand.
Question 4
An increase in aggregate demand is more likely to lead to demand pull inflation if:
Your Answer:
b) Aggregate supply is perfectly inelastic
Feedback:
The increase in aggregate demand is more likely to increase prices if aggregate supply
is price inelastic.
Question 5
Your Answer:
c) Reduce the natural rate of unemployment
Correct Answer:
b) Shift aggregate supply
Feedback:
An increase in costs will shift the aggregate supply inwards and increase price.
Question 6
Your Answer:
c) A depreciation of the currency
Feedback:
A depreciation of the currency will in itself reduce the prices of products abroad; this can
offset inflation.
Question 7
Your Answer:
c) Costs of money increasing its value
Feedback:
With inflation price lists need updating; these are menu costs.
Question 8
In the short run unemployment may fall below the natural rate of unemployment if:
Your Answer:
b) Nominal wages have risen at the same rate as inflation
Correct Answer:
a) Nominal wages have risen less than inflation
Feedback:
Unemployment can fall below the natural rate if the real wage falls because prices are
growing faster than nominal wages.
Question 9
According to the Phillips curve unemployment will return to the natural rate when:
Feedback:
Unemployment will return to the natural rate when the real wage is back at equilibrium
level.
Question 10
The Phillips curve shows the relationship between inflation and what?