Proponents of the notion of a "political business cycle" suggest that:
A. a possible cause of economic fluctuations is due to the use of fiscal policy for political purposes.
B. cyclical swings in the economy are produced by the inherent instability found in capitalist economies.
C. the cyclically adjusted budget is a better indicator of the state of the economy than the actual budget.
D. there is a trade-off among goals that tends to make the economic policies of state and local governments procyclical.
Answer: A
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During periods of poor economic performance, real GDP
A) declines and unemployment declines. B) is unchanged but unemployment rises sharply. C) declines and unemployment rises. D) declines but unemployment typically does not change.
The initial Phillips curve relationship implied that the opportunity cost of _____ was higher _____
a. reducing unemployment; inflation b. increasing unemployment; inflation c. decreasing employment; interest rate d. increasing employment; deflation e. increasing employment; interest rate