Picture an economy that is in general equilibrium. What would happen if the natural rate of unemployment were to experience an increase?
A) according to the Phillips curve, the ensuing negative unemployment gap would exert inflationary pressures
B) according to Okun's Law, the ensuing negative unemployment gap would be consistent with a positive output gap
C) according to the AD-AS framework, the LRAS curve would shift to the left and the ensuing positive output gap would be closed by subsequent leftward shifts in the AS curve to higher equilibrium levels of inflation
D) all of the above
E) none of the above
D
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A. 30. B. 25. C. 45. D. 40.
The required reserves of a bank are determined by multiplying the bank's checkable deposits by the required reserve ratio
a. True b. False Indicate whether the statement is true or false
Regulating an industry to remove all economic profit
A. removes all incentive for efficiency and responsiveness to consumer demand. B. removes distortions caused by cross subsidies. C. removes allocative inefficiency. D. increases incentives to be productively efficient.
If you concluded from the fact that the last three recessions have occurred while Republicans were President that their fiscal policies create recessions then you would be
A. wrong and have fallen victim to the fallacy of composition. B. wrong because Democrats are much worse. C. wrong because causation and correlation are not the same. D. right.