Chapter 18 pt. II – Flashcards
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The traditional Phillips Curve shows the:
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Inverse correlation between the rate of inflation and the rate of unemployment
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The traditional Phillips Curve showing a tradeoff between inflation and unemployment is based on having a stable:
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Short-run aggregate supply and a shifting aggregate demand
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Given a Phillips Curve with stable and predictable inflation and unemployment rate tradeoffs, it appears that:
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Manipulating aggregate demand through fiscal and monetary policies has the effect of causing a movement along the curve
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The inflation and unemployment data for the 1970s suggest that the aggregate-supply shocks of that period caused the:
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Phillips Curve to shift to the right
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Adverse aggregate-supply shocks or stagflation would cause a:
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Shift of the Phillips Curve to the right
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Stagflation can be described as a:
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Shift left in the aggregate supply curve
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Which event probably contributed to the stagflation of the 1970s?
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A sharp rise the price of oil
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Adverse aggregate supply shocks would result in:
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A higher rate of inflation and a higher rate of unemployment
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A potential cause of stagflation is:
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Declining productivity
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Stagflation's demise during the 1980s resulted in a:
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Shift in the Phillips Curve to the left
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The misery index is a measure of national economic discomfort that adds together a nation's:
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Unemployment rate and inflation rate
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The automatic adjustment mechanism that makes the economy move towards the long-run Phillips Curve is:
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Inflation expectations and wage adjustments
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The long-run Phillips Curve is vertical at:
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The natural rate of unemployment
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Which is a basic proposition of supply-side economics?
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Tax-hikes on business reduce productivity and output and reduce aggregate supply
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Supply-side economists contend that the system of taxation in the United States:
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Creates dis-incentives to work
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Supply-side policies can be described in terms of the aggregate demand and aggregate supply model as an attempt to shift:
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The aggregate supply curve to the right
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A Congressional representative who calls for a decrease in tax rates in order to increase saving, work effort, and economic growth would most likely be advocating:
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A supply-side fiscal policy
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In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a:
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Rightward shift of the long-run aggregate supply curve
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One central idea in supply-side economics concerning budget deficits is illustrated by the:
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The Laffer Curve
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Based on the Laffer Curve, a cut in the tax rate from 100 percent to a rate lower than the maximum-revenue rate will:
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Increase tax revenues
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Most economists think that:
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Demand-side effects of a tax cut exceed the supply-side effects
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A senator states: "We need to cut taxes in order to increase incentives to work and produce, so that we can pull the nation out of this economic slump." A mainstream economist who is a critic of this policy would likely reply that:
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Increasing government spending is a surer way to increase production and pull the nation out of this economic slump
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One criticism against "supply-side" cuts in marginal tax rates is that they fail to:
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Increase aggregate supply more rapidly than aggregate demand
