Inflation And Disinflation

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Questions Bank

Economic Issues and Concepts
Economic Theories,Data,and Graphs
Demand,Supply,and Price
Elasticity
Price Controls and Market Efficiency
Consumer Behaviour
Producers in the Short Run
Producers in the Long Run
Competitive Markets
Monopoly,cartels,and Price Discrimination
Imperfect Competition and Strategic Behaviour
Economic Efficiency and Public Policy
How Factor Markets Work
Labour Markets and Income Inequality
Interest Rates and the Capital Market
Market Failures and Government Intervention
The Economics of Environmental Protection
Taxation and Public Expenditure
What Macroeconomics Is All About
The Measurement of National Income
The Simplest Short-Run Macro Model
Adding Government and Trade to the Simple Macro Model
Output and Prices in the Short Run
From the Short Run to the Long Run: The Adjustment of Factor Prices
Long-Run Economic Growth
Money and Banking
Money,Interest Rates,and Economic Activity
Monetary Policy in Canada
Inflation and Disinflation
Unemployment Fluctuations and the Nairu
Government Debt and Deficits
The Gains From International Trade
Trade Policy
Exchange Rates and the Balance of Payments

All Questions

Question 1

Free

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?

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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

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Question 2

Free

Multiple Choice

The term NAIRU stands for the

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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.

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Question 3

Free

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 the NAIRU is and the actual unemployment rate is .

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6%; 5%

5%; 9%

7%; 9%

7%; 7%

6%; 6%

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Question 4

Free

Multiple Choice

Suppose economists were able to measure frictional unemployment as 2%,cyclical unemployment as 0%,and structural unemployment as 3%.Then we would know that the NAIRU is and the actual unemployment rate is .

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0%; 5%

5%; 5%

0%; 3%

5%; 0%

2%; 5%

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Question 5

Free

Multiple Choice

If the unemployment rate is greater than the NAIRU,

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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.

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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

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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,

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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

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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

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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%,

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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

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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

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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,

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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?

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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?

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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

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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)?

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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 .

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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 .

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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

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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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Inflation And Disinflation

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 term NAIRU stands for the

Suppose economists were able to measure frictional unemployment as 3%,cyclical unemployment as 2%,and structural unemployment as 4%.Then we would know that the NAIRU is ________ and the actual unemployment rate is ________ .

Suppose economists were able to measure frictional unemployment as 2%,cyclical unemployment as 0%,and structural unemployment as 3%.Then we would know that the NAIRU is ________ and the actual unemployment rate is ________ .

If the unemployment rate is greater than the NAIRU,

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

If the unemployment rate is less than the NAIRU,

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

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

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

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

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

Which of the following will lead to sustained inflation?

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

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

Actual inflation would be 2% when expected future inflation is ________ ,output-gap inflation is ________ ,and supply-shock inflation 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 economists were able to measure frictional unemployment as 3%,cyclical unemployment as 2%,and structural unemployment as 4%.Then we would know that the NAIRU is and the actual unemployment rate is .

Suppose economists were able to measure frictional unemployment as 2%,cyclical unemployment as 0%,and structural unemployment as 3%.Then we would know that the NAIRU is and the actual unemployment rate is .

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

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