Question

Economics Chapter 16

1.	The long-run Phillips curve:
	suggests that policies have little effect on the natural rate of unemployment in the long run. depicts the negative relationship between the unemployment rate and the inflation rate. explains how expansionary policies can affect an economy, while contractionary policies have little effect. shows the positive relationship between the unemployment rate and the inflation rate.

2.	Which statement accurately describes disinflation?
	It is a reduction of the inflation. It must be accompanied by a decline in the price level. The inflation rate rises at a higher rate. It is a gradual reduction in the price level over time.

3.	If the natural rate of unemployment is 5% and the actual rate of unemployment is 4%:
	disinflation is likely. the short-run Phillips curve will shift down. inflation will increase. it will not affect prices.

4.	Who gains when there is unexpected deflation?
	borrowers real-asset owners lenders real-asset owners, borrowers, and lenders

5.	Disinflation:
	policy may plunge the economy into a recession. occurs as a result of policy makers' attempts to correct a major recession. entails eliminating inflation in an economy. results in a fall in the unemployment rate.

Answer 1