Crowdly

A stable combination of inflation and unemployment.

Any preferred rate of inflation, for a given level of unemployment.

A temporary combination of inflation and unemployment.

3 per cent then 2 per cent.

According to the revised version of the Phillips curve, as shown in the figure, if the rate of inflation last year was 3 per cent and the bargaining gap this year and next year is 1 per cent, then inflation this year and next will be:

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4 per cent then 5 per cent.

3 per cent then 4 per cent.

4 per cent then 3 per cent.

The start of an inflationary process.

In the figure shown, the distance between the price-setting curve and the wage-setting curve at C indicates:

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A labour market equilibrium.

A positive bargaining gap.

A negative bargaining gap.

Increase; rising unemployment.

In the figure shown, when employment is at level C, the real wage lies below the price-settingcurve. Assume inflation is zero. In a competitive system, firms will begin to …. prices and this will start a process of ….

Suppose aggregate demand drops (e.g. due to lower government spending). How will that affect the situation in the WS-PS model?

There is a negative bargaining

gap.

Nominal

wages increase.

The price level falls.

Unemployment will go down.

Create a positive bargaining gap.

A fall in the world price of commodities will:

Trigger accelerating inflation.

Shift the price-setting curve up and the Phillips curve down.

Shift the price-setting curve down and the Phillips curve up.

An easing of monetary policy by the central bank.

Suppose that in an economy with no taxation and no external trade, the marginal propensity to consume is 0.7. The size of the multiplier (rounded to 2 decimal places) will be?

Which of the following is likely to lead to a fall in the level of investment spending?

An official forecast of a downturn in the economy.

A rise in interest rates and increased optimism about future demand.

A rise in the expected rate of profit.

An increase in the level of exports leads to a higher multiplier.

Which of the following statements regarding the multiplier is correct?

If two countries were identical except for the share of credit-constrained households, then the country with the higher share would have a smaller multiplier.

Taxation and imports are ‘leakages’ from the circular flow of income, which reduce the size of the multiplier.

The multiplier is constant over the business cycle.

We have overlooked the effect of taxation and external trade.

A multiplier of 3 or above would be considered exceptionally high for most modern economies. Which of the following statements gives the most complete explanation for this fact?

Credit is probably easier to obtain than we think.

We have overlooked the effect of taxation.

The national accounts overstate consumption.