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Reading 26: Inflation - LOS e, (Part 1) ~ Q1-3

1.If an increase in aggregate demand is greater than expected, actual inflation is:

A)   greater than expected inflation and unemployment increases.

B)   less than expected inflation and unemployment decreases.

C)   greater than expected inflation and unemployment decreases.

D)   less than expected inflation and unemployment increases.

2.The short-run relationship between unexpected inflation and:

A)   unemployment is positive.

B)   unemployment is negative.

C)   actual inflation is positive.

D)   actual inflation is negative.

3.Analysis using the AS-AD model suggests that if expected inflation equals actual inflation:

A)   unemployment will rise.

B)   unemployment will fall.

C)   the level of GDP will fall.

D)   the economy will remain at full-employment GDP.

thx

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答案和详解如下:

1.If an increase in aggregate demand is greater than expected, actual inflation is:

A)   greater than expected inflation and unemployment increases.

B)   less than expected inflation and unemployment decreases.

C)   greater than expected inflation and unemployment decreases.

D)   less than expected inflation and unemployment increases.

The correct answer was C)

A greater than expected increase in aggregate demand suggests that actual inflation will exceed expected inflation and unemployment will decrease.

2.The short-run relationship between unexpected inflation and:

A)   unemployment is positive.

B)   unemployment is negative.

C)   actual inflation is positive.

D)   actual inflation is negative.

The correct answer was B)

The relationship between unexpected inflation and unemployment is a negative one in the short run. There should be no trend in the relationship between unexpected and actual inflation—that is the difference should be zero in the long run and uncorrelated in the short run.

3.Analysis using the AS-AD model suggests that if expected inflation equals actual inflation:

A)   unemployment will rise.

B)   unemployment will fall.

C)   the level of GDP will fall.

D)   the economy will remain at full-employment GDP.

The correct answer was D)

AS-AD model analysis indicates that if expected and actual inflation are equal, the economy will remain at full-employment GDP.

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