# Inflation And Disinflation

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Question 1
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Multiple Choice

## Suppose the Canadian economy is facing an inflationary output gap (Y > Y*).In our macro model,such an output gap can explain changes in which of the following variables?

the average level of wages

the level of wages in the forestry sector relative to the mining sector

the level of wages in a high-growth region of the country relative to a slow-growth region

the level of wages for skilled workers relative to unskilled workers

the level of wages for female workers relative to male workers

Question 2
Free
Multiple Choice

## The term NAIRU stands for the

non-accelerating inflation rate of unemployment.

natural and indexed rate of unemployment.

non-accelerating,indexed and regulated unemployment.

North American indexed rate of unemployment.

North American inflation rate of unemployment.

Question 3
Free
Multiple Choice

6%; 5%

5%; 9%

7%; 9%

7%; 7%

6%; 6%

Question 4
Free
Multiple Choice

0%; 5%

5%; 5%

0%; 3%

5%; 0%

2%; 5%

Question 5
Free
Multiple Choice

## If the unemployment rate is greater than the NAIRU,

there will be upward pressure on wages.

the AS curve will shift upward.

there is a negative output gap.

real national income is above potential GDP.

there is an inflationary gap.

Question 6
Multiple Choice

## Suppose economists were able to measure frictional unemployment as 3%,cyclical unemployment as 2%,and structural unemployment as 4%.Then we would know that

Y is below Y* and there is downward pressure on wages.
Y is below Y* and there is upward pressure on wages.
Y is equal to Y* and there is no pressure on wages.
Y is above Y* and there is downward pressure on wages.
Y is above Y* and there is upward pressure on wages.
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Question 7
Multiple Choice

## If the unemployment rate is less than the NAIRU,

there is no pressure on the AS curve to shift.
there is a recessionary output gap.
demand forces will exert upward pressure on wages.
the AS curve will shift downward.
there will be downward pressure on wages.
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Question 8
Multiple Choice

## Inflationary pressures that result from a rightward shift in the AD curve

cause Y to fall below Y*.
will worsen any existing unemployment problem.
will initiate a wage-price spiral.
will eventually subside unless accompanied by continual increases in the money supply.
will permanently increase output.
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Question 9
Multiple Choice

## Other things being equal,unit costs will rise and the AS curve will shift upward if

there is a fall in the price of oil.
the government reduces payroll taxes.
wage increases exceed productivity increases.
wages rise.
wage and price controls are in effect.
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Question 10
Multiple Choice

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

there is no pressure on the AS curve to shift.
there is a recessionary gap.
demand forces put upward pressure on wages.
the AS curve will shift downward.
it will get stuck there permanently.
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Question 11
Multiple Choice

## Suppose the NAIRU for Canada is 6%,the actual unemployment rate is 7%,and productivity is constant.We can conclude that

there is an inflationary gap.
the NAIRU will readjust to 7%.
the AD curve will automatically shift up.
the excess demand for labour will put upward pressure on wages.
the excess supply of labour will put downward pressure on wages.
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Question 12
Multiple Choice

## Suppose the NAIRU for Canada is 6.5%,the actual unemployment rate is 5% and productivity is constant.We can conclude that

there is a recessionary gap.
the NAIRU will re-adjust to 5%.
the AD curve will automatically shift up.
the excess demand for labour will put upward pressure on wages.
the excess supply of labour will put downward pressure on wages.
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Question 13
Multiple Choice

## 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,

it will move real GDP back toward potential GDP.
it will worsen the existing inflationary gap.
it will increase the unemployment rate.
the AD curve will shift to the left.
the AS curve will shift upward.
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Question 14
Multiple Choice

## Which of the following will lead to sustained inflation?

the imposition of a new sales tax
the sudden doubling of a key raw materials price
a new payroll tax that raises firms' unit labour costs
persistent expectations of continued inflation
an early frost that damages the agricultural harvest
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Question 15
Multiple Choice

## Which of the following would be expected to cause a an increase in the inflation rate rather than a once-and-for-all increase in the price level?

the imposition of a new sales tax
the sudden doubling of a key raw materials price
a new payroll tax that raises unit wage costs
expectations of higher future inflation
an early frost that damages the agricultural harvest
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Question 16
Multiple Choice

## The reason why inflation can persist even after its original causes have been removed is that

workers expect wage increases to match increases in labour productivity.
workers are willing to accept wage increases lower than the increase in productivity.
the Bank of Canada ensures that money-supply growth matches growth in real GDP.
inflationary expectations cause the AS curve to continue shifting upwards.
governments embark on a deficit-cutting program.
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Question 17
Multiple Choice

## Increases in nominal wages in the economy are generally the effect of which force(s)?

output-gap effect
expectational effect
supply-shock inflation
output gap effect plus expectational effect
output gap effect plus expectational effect minus supply-shock inflation
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Question 18
Multiple Choice

## Actual inflation would be 2% when expected future inflation is ________ ,output-gap inflation is ________ ,and supply-shock inflation is ________ .

2%; 2%; 2%
2%; 0%; -2%
2%; 0%; 0%
1%; 1%; 1%
0%; 0%; -2%
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Question 19
Multiple Choice

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

2%; 2%; 2%
2%; 0%; -2%
2%; 0%; 0%
1%; 1%; 1%
0%; 0%; -2%
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Question 20
Multiple Choice

## 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

the NAIRU is 5%.
money wages must be rising by 5%.
non-wage supply-shock inflation must equal 2%.
expected inflation is rising by 2%.
the actual rate of inflation is falling.
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