The relationship between inflation and unemployment is given by ? = ?e - 4(u - 
).(a)Draw a diagram showing a long-run Phillips curve and two short-run Phillips curves that contain the following points: A: ? = .04, ?e = .04 B: ? = .08, ?e = .08 C: ? = .04, ?e = .08 D: ? = .08, ?e = .04Label points A, B, C, and D in your diagram.The unemployment rate at point A equals .05.(b)What are the values of the natural rate of unemployment and the unemployment rates at points B, C, and D?
What will be an ideal response?
| (a) | Long run: vertical line at u =  = 0.05. |
| (b) |  = 0.05.; B: u = .05; C: u = .06; D: u = .04 |
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In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $6 per book
At this price, the quantity of books supplied to the market will be A) 3 million a month and will equal the quantity demanded. B) less than 3 million a month and will exceed the quantity demanded. C) less than 3 million a month and will be less than the quantity demanded. D) more than 3 million a month and will exceed the quantity demanded.
In building a model the assumption that allows economists to study only the factors being analyzed is the
A) rationality assumption. B) ceteris paribus assumption. C) the self-interest assumption. D) the scarcity assumption.
The recent rise in the price of gasoline has caused:
A. automakers to produce more gas-efficient cars. B. automakers to drop the price of gas-efficient vehicles. C. automakers to spend more money marketing bigger vehicles. D. would not affect an automaker's supply decisions.
If Country A exports a good to Country B, who is made better off?
a. The producers in Country A and the consumers in Country B b. The consumers in Country A and the consumers in Country B c. The producers in Country A and the producers in Country B d. The consumers in Country A and the producers in Country B e. Only the consumers in Country A will benefit from this trade agreement