In the graph showing the Phillips curve after a negative supply shock, we can see that high energy prices in the late 1970s caused ______.
a. an increase in inflation rate and a decrease in unemployment rate
b. a decrease in inflation rate and an increase in unemployment rate
c. an increase in both inflation and unemployment rates
d. a decrease in both inflation and unemployment rates
c. an increase in both inflation and unemployment rates
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Economists consider an economy to be at "full employment" when
A) the unemployment rate equals the natural rate of unemployment. B) there is no structural unemployment. C) there is no frictional unemployment. D) there is only a small amount of cyclical unemployment.
Imagine that the economy is at a point that is above both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?
A) The economy will stay at this level in the short run. B) The exchange rate will first drop to a point on the AA schedule. C) The exchange rate will first move to a point on the DD schedule. D) The AA-DD equilibrium will shift to the position of the economy. E) The exchange rate will first move left to a position on the AA schedule.