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Exam 29: Inflation and Disinflation

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Question 51

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An inflation that begins as a result of any demand or supply shock will eventually come to a halt

A) if there is no monetary validation.
B) in the long run.
C) in the short run.
D) independent of the economyʹs adjustment process.
E) if expected inflation is positive but constant.

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Question 52

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When a central bank attempts to stop a constant inflation,it tries to remove the inflationary gap by

A) shifting the AS curve upward.
B) shifting the AS curve downward.
C) increasing the rightward shift of the AD curve.
D) stopping the rightward shift of the AD curve.
E) taking no action and allowing the market to correct itself.

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Question 53

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The sacrifice ratio reflects the cost of ________ as measured by the ________.

The idea that,in the long run,the Phillips curve is vertical,implying no trade -off between inflation and unemployment,is based on the premise that

If the NAIRU is 8% and the actual unemployment rate is 5%,

For the economy of Canada,a major oil user and exporter,a decrease in the world price of oil would be considered

The view that sustained inflation is possible only with continuous monetary validation is now widely accepted but was made famous by and is still closely associated with

Consider an economy without any supply shocks.If the expected inflation rate is 3% and the actual inflation rate is also 3%,then it is probably true that

Suppose that an increase in world oil prices leads to greater demand for Canadian oil exports.If the Bank of Canada reduces the overnight interest rate in response to this increase in AD,this is called

One of the results of the restrictive monetary policy adopted by the Bank of Canada in the early 1980s was that

The reason that some economists advise central banks to never validate a negative supply shock is

Which of the following is consistent with constant inflation: expected future inflation of ________, output -gap inflation of ________, and supply-shock inflation ________.

Suppose the actual rate of inflation in the economy is 5%.If we know that expected inflation is 2%,and that output-gap inflation is 1%,then we also know that

Suppose the NAIRU for Canada is 6.5%,and the actual unemployment rate is 5%.If the Bank of Canada reduces its target for the overnight interest rate,

A contractionary monetary policy that has been imposed to reduce inflation will most likely

If the central bank uses monetary policy to attempt to hold real GDP ( Y) permanently above potential GDP (Y*) ,

In the basic AD/AS macro model,actual inflation is the sum of three separate components.They are

The first OPEC oil-price shock in 1973 caused the AS curves in all industrialized countries to shift upward.The Bank of Canada validated this negative supply shock with an increase in the money supply,whereas in the United States such monetary validation did not take place.The predictable result was that