PRINC OF ECONOMICS PKG >CUSTOM<
7th Edition
ISBN: 9781305018549
Author: Mankiw
Publisher: CENGAGE C
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Chapter 35, Problem 6CQQ
To determine
The reason for changes in inflation and unemployment .
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Students have asked these similar questions
Explain why a sudden, large burst of inflation could lead to a recession?
Describe the fiscal and monetary measures that are normally taken to curb inflation.
If the economy is in long-term equilibrium and cost of energy for production increases, which of the following is likely to occur?
Select one:
a. It will lead to demand-pulled inflation and create an expansionary gap.
b. It will lead to demand-puled inflation and create a contractionary gap.
c. It will lead to cost-pushed inflation and create an expansionary gap.
d. It will lead to cost-pushed inflation and create a contractionary gap.
e. It will create hyperinflation in the economy, but will not create an economic gap.
Chapter 35 Solutions
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- What's wrong with this way of thinking? "When the government runs a budget deficit, it simply pays its bills by printing more money. As the newly printed money works its way through the economy, it waters down the value of paper money already in circulation. Thus, it takes more money to buy things. Budget deficits are the major cause of inflation."arrow_forwardExplain the two causes of inflationarrow_forwardWhen an economy approaches full employment, why does demand-pull inflation become a problem? Explain.arrow_forward
- One of the fiscal measures of dealing with inflation is: a. Implement a budget surplus b. Operate a budget deficit c. Increase the rate of interest d. Operate a balance budgetarrow_forward1. The inflation-unemployment relationship The following graph shows the combinations of unemployment and inflation that existed in the United States for selected years between 1961 and 1969. Click on any blue point (circle symbol) on the graph to get its exact coordinates. You can also use the black point (cross symbol) to find the coordinates of other points along the curve. (Note: You will not be graded for any adjustments made to the graph.) NFLATION RATE (Percent) 5.0 4.5 4.0 3.5 3.0 2.5 20 1.5 1.0 0.5 0 3.0 3.5 1969 1968 1967 1965 4.0 1964 4.5 6.0 UNEMPLOYMENT RATE (Percent) 5.0 5.5 1963 6.5 1961 7.0 ?arrow_forwardA central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?arrow_forward
- Explain what we can understand by expected inflation, inflation due to an increase in aggregate demand or inflation due to a decrease in aggregate supply.arrow_forwardStarting from a zero rate of inflation, suppose some event decreases aggregate demand. Use flow diagrams and the labor market graph to explain what happens to wages and prices which results in the “wage-price spiral”. What happens to the rate of inflation?arrow_forwardSuppose the economy is experiencing an inflationary gap. In the long run, if there is no government intervention, the nominal wages will_________, unemployment will________, and price level will___________. Group of answer choices rise; fall; rise rise; fall; fall rise; rise; rise fall; fall; fallarrow_forward
- Syria’s economic situation is getting worse. Price levels are increasing significantly as the flow of supplies remain low. How can the level of inflation be controlled in a situation like this? a. Increase aggregate demand by expansionary fiscal policy b. Increase money supply by decreasing bank reserve requirements c. Increase tax collections to limit aggregate demand d. Increase aggregate supply through importation of necessary goodsarrow_forwardSuppose an economy has a high rate of unemployment and a high rate of inflation. What kind of policy measures would you suggest to fight inflation and increase employment?arrow_forwardWhat does the phrase “inflation is always and everywhere a monetary phenomenon” mean? Printing more money is the main cause of deflation in the economy. Printing less money is the main cause of higher inflation rates in the economy. Increasing the money supply is the main cause of higher inflation rates in the economy. Printing more money is the main cause of a higher standard of living because everyone gets more money to spend so inflation doesn’t matter.arrow_forward
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