According to Friedman and Phelps, which of the following statements is a correct characterization of unemployment and inflation in the United States since the 1950s?
A. A trade-off between inflation and unemployment as pictured in the Phillips curve existed over the entire time period.
B. There is no clear relationship between unemployment and inflation.
C. A trade-off between inflation and unemployment as pictured in the Phillips curve existed in the 1970s and 1980s, but not over the entire period.
D. The relationship between inflation and unemployment is very different from the Phillips curve. A positive relationship is evident rather than an inverse relationship.
Answer: B
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The table below represents five points on the production possibility frontier for the small country of Bistro, which produces only crackers (measured in thousands of boxes) and cheese (measured in thousands of pounds): A B C D E Crackers 40 30
20 10 0 Cheese 0 5 10 15 20 Does the production possibility frontier demonstrate the law of increasing opportunity cost? How can you tell?
If the Fed wishes to reduce inflation then it should
a. increase the discount rate. b. decrease reserve requirements. c. buy government securities on the open market. d. Do any of the above.
A Marshallian, or uncompensated, demand curve reflects:
A. only the substitution effect of a price change. B. only the income effect of a price change. C. both the income and substitution effects of a price change. D. neither the income nor the substitution effects of a price change.
As a result of a labeling mistake at the chemical factory, a farmer accidentally sprays weedkiller rather than fertilizer on half her land. As a result, she loses half of her productive farmland. If the property of diminishing returns applies to all factors of production, she should expect to see
a. an increase in the marginal productivity of her remaining land and an increase in the marginal productivity of her labor. b. an increase in the marginal productivity of her remaining land and a decrease in the marginal productivity of her labor. c. a decrease in the marginal productivity of her remaining land and an increase in the marginal productivity of her labor. d. a decrease in the marginal productivity of her remaining land and a decrease in the marginal productivity of her labor.