Board logo

标题: Reading 26: Inflation - LOS e, (Part 2) ~ Q1-7 [打印本页]

作者: cfaedu    时间: 2008-5-15 13:45     标题: [2008] Session 6 - Reading 26: Inflation - LOS e, (Part 2) ~ Q1-7

1.What would be the impact of an unanticipated increase in aggregate demand on an economy’s rate of unemployment, rate of inflation, and the short-run Phillips curve (SRPC)?

 

Unemployment

Inflation

SRPC

A)                 Decrease                              Increase             Upward movement along curve

B)                 Increase                               Increase              Downward movement along curve

C)                 No effect                              Decrease             Upward shift of curve

D)                 Decrease                             Decrease             Downward shift of curve

2.The Phillips curve shows the trade-off between:

A)   the rate of change in the money supply and the rate of change in employment.

B)   nominal interest rates and real interest rates.

C)   inflation and unemployment.

D)   aggregate demand and the real wage rate.

3.Geno Potosi is delivering a lecture on the Phillips curve model, during which he makes the following two statements:

Statement 1: If expected inflation is less than actual inflation, the short-run Phillips curve shows that the unemployment rate will increase.

Statement 2: The negative relationship between the inflation rate and unemployment rate does not hold in the long run because the expected inflation rate adjusts to the actual performance of inflation.

Are Potosi’s two statements correct?

 

Statement 1

Statement 2

A)                        Correct                       Correct

B)                       Incorrect                      Correct

C)                        Correct                      Incorrect

D)                       Incorrect                     Incorrect

4.In the Phillips curve model of the relationship between inflation and the unemployment rate, a shift to a new short-run Phillips curve represents a change in the:

A)   expected inflation rate.

B)   actual inflation rate.

C)   unemployment rate.

D)   long-run Phillips curve.

5.For an economy operating at full employment, if actual inflation is less than expected inflation, what will most likely be the effects on the unemployment rate in the short run and in the long run?

 

Short run

Long run

A)                   Increase                             Increase

B)                   Decrease                           No effect

C)                   Increase                             No effect

D)                   Decrease                           Decrease

6.Which of these factors is least likely to change the natural rate of unemployment?

A)   An unexpected tightening of the money supply reduces aggregate demand.

B)   Long-term demographic shifts result in fewer young adults in the labor force.

C)   Labor market deregulation makes it easier for workers to change jobs.

D)   Technological developments open up new fields of employment while replacing some existing ones.

7.A shift in the long-run Phillips curve represents a change in the:

A)   actual inflation rate.

B)   expected inflation rate.

C)   natural rate of unemployment.

D)   sensitivity of unemployment to changes in inflation.


作者: cfaedu    时间: 2008-5-15 13:47

答案和详解如下:

1.What would be the impact of an unanticipated increase in aggregate demand on an economy’s rate of unemployment, rate of inflation, and the short-run Phillips curve (SRPC)?

 

Unemployment

Inflation

SRPC

A)                   Decrease                            Increase            Upward movement along curve

B)                   Increase                              Increase            Downward movement along curve

C)                   No effect                             Decrease           Upward shift of curve

D)                   Decrease                            Decrease           Downward shift of curve

The correct answer was A)

Assume that the expected inflation rate is 8 percent a year and that the natural rate of unemployment is 5 percent for an economy. An unanticipated increase in aggregate demand will cause firms to hire more workers in the short-run. That action should reduce the economy’s unemployment rate below its natural rate. However, as aggregate demand increases the inflation rate will increase. This joint action would result in an upward movement along the short-run Phillips curve.

2.The Phillips curve shows the trade-off between:

A)   the rate of change in the money supply and the rate of change in employment.

B)   nominal interest rates and real interest rates.

C)   inflation and unemployment.

D)   aggregate demand and the real wage rate.

The correct answer was C)

The theory of the Phillips curve is that there is an inverse relationship between the inflation rate and the unemployment rate.

3.Geno Potosi is delivering a lecture on the Phillips curve model, during which he makes the following two statements:

Statement 1: If expected inflation is less than actual inflation, the short-run Phillips curve shows that the unemployment rate will increase.

Statement 2: The negative relationship between the inflation rate and unemployment rate does not hold in the long run because the expected inflation rate adjusts to the actual performance of inflation.

Are Potosi’s two statements correct?

 

Statement 1

Statement 2

A)                        Correct                        Correct

B)                       Incorrect                       Correct

C)                        Correct                       Incorrect

D)                       Incorrect                      Incorrect

The correct answer was B)

Statement 1 is incorrect. If actual inflation is greater than expected inflation, such as would occur in the case of a greater-than-expected increase in aggregate demand, the unemployment rate decreases in the short run. Statement 2 is correct. The short-run difference between expected and actual inflation is the source of the short-run negative relationship between inflation and unemployment.

4.In the Phillips curve model of the relationship between inflation and the unemployment rate, a shift to a new short-run Phillips curve represents a change in the:

A)   expected inflation rate.

B)   actual inflation rate.

C)   unemployment rate.

D)   long-run Phillips curve.

The correct answer was A)

A short-run Phillips curve is constructed assuming a particular expected inflation rate, given a constant long-run Phillips curve at the natural rate of unemployment. Changes in the actual inflation rate or the short-run unemployment rate would represent movement along the short-run Phillips curve. If actual inflation is sustained above or below the expected inflation rate, inflation expectations adjust in the long run. This would be seen as a new short-run Phillips curve that intersects the long-run Phillips curve at the new expected inflation rate.

5.For an economy operating at full employment, if actual inflation is less than expected inflation, what will most likely be the effects on the unemployment rate in the short run and in the long run?

 

Short run

Long run

A)                    Increase                             Increase

B)                    Decrease                           No effect

C)                    Increase                             No effect

D)                    Decrease                           Decrease

The correct answer was C)

Using the Phillips curve model, if actual inflation is less than expected inflation, the short-run effect is to reduce GDP growth and increase the unemployment rate. If the lower inflation rate is maintained, in the long run it becomes the new expected inflation rate, and unemployment returns to its natural rate.

6.Which of these factors is least likely to change the natural rate of unemployment?

A)   An unexpected tightening of the money supply reduces aggregate demand.

B)   Long-term demographic shifts result in fewer young adults in the labor force.

C)   Labor market deregulation makes it easier for workers to change jobs.

D)   Technological developments open up new fields of employment while replacing some existing ones.

The correct answer was A)

The natural rate of unemployment is the sum of frictional and structural unemployment. An unexpected decrease in the money supply would bring about cyclical unemployment. The natural rate is influenced by such factors as composition and mobility of the labor force and the level of technology available in the economy.

7.A shift in the long-run Phillips curve represents a change in the:

A)   actual inflation rate.

B)   expected inflation rate.

C)   natural rate of unemployment.

D)   sensitivity of unemployment to changes in inflation.

The correct answer was C)

The long-run Phillips curve represents the natural rate of unemployment. Changes in the natural rate can occur due to long-run changes in the state of technology and the size, makeup, and mobility of the labor force.






欢迎光临 CFA论坛 (http://forum.theanalystspace.com/) Powered by Discuz! 7.2