Answer the following statements true (T) or false (F)
1. When there is an increase in aggregate demand in the short run, there will be an increase in the price level but not in the level of output or employment.
2. When the economy is experiencing demand-pull inflation, its real GDP tends to be rising.
3. The oil crises of the 1970s and 1980s can best be illustrated as a shift of the aggregate demand curve to the left.
4. Cost-push inflation can be described as a rightward shift of the aggregate supply curve.
5. Minimum wage laws tend to make the price level more flexible rather than less flexible.
1. False
2. True
3. False
4. False
5. False
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Some economists argue that the short-run Phillips curve is not vertical, and that monetary policy can be effective in the short run. Which one of the following is not one of the reasons for this skepticism?
A) Wages and prices may not adjust rapidly enough to keep the short-run Phillips curve vertical. B) Individuals may not be able to use information of Fed Policy to make a reliable forecast of inflation. C) Empirical evidence shows workers and firms have rational expectations. D) Contracts with workers and suppliers may hinder firms' abilities to adjust to price changes.
The short-run Phillips curve will tend to shift during any period when: a. aggregate supply changes
b. real wages or input prices change because of changes in the supplies of labor or other inputs. c. inflationary expectations change. d. all of the above