Explain the natural unemployment rate and its relationship to inflation rate
What will be an ideal response?
The natural unemployment rate is the unemployment rate at which the inflation rate remains constant. When the actual unemployment rate exceeds the natural rate of unemployment, the inflation rate typically decreases; when the actual unemployment rate is less than the natural unemployment, the inflation rate typically increases.
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Hyperinflation is caused by
A) the money supply growing more slowly than GDP. B) Real GDP growing more rapidly than the money supply. C) a constant increase in the money supply. D) a high rate of growth in the money supply.
An increase in income (all else equal) will ALWAYS lead to a parallel shift of the budget line
Indicate whether the statement is true or false
Which of the following would make the spending multiplier smaller?
A) a reduction in marginal propensity to save B) a small initial trade deficit C) a reduction in the marginal propensity to import D) a real appreciation E) none of the above
The perfectly competitive firm's total revenue curve
A) is linear and upward sloping. B) has a constant slope. C) has a positive slope. D) all of the above.