Suppose the output gap is zero, and policy makers wish to reduce the inflation rate from 10 percent to 5 percent. Which of these policies seems best?
A) contractionary policies to reduce output at least 5 percent below potential output
B) a convincing declaration of the inflation rate target, so that expected inflation falls to 5 percent
C) no policy action; inflation will fall on its own, eventually
D) no policy action; inflation will converge to its long-run rate, regardless of policy
E) price and wage controls to counteract their stickiness
B
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Data for which country were first used to illustrate the relationship between unemployment and inflation (i.e., the original Phillips curve)?
A) France B) United States C) Canada D) Germany E) none of the above
Which of the following statements is true concerning the consumption function?
a. It slopes upward. b. Its slope equals the MPC. c. It represents the direct (positive) relationship between consumption spending and the level of real disposable income. d. If the consumption function lies above the 45-degree line then saving is positive. e. All of these.