Practice Questions
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What is the relationship between inflationary gaps and the unemployment rate?
An inflationary gap happens when the economy is doing really well. Other options are incorrect because This answer suggests that when the economy is b...
According to the Phillips curve, what is the expected relationship between the unemployment rate and inflation during an inflationary gap?
When more people have jobs, they spend more money. Other options are incorrect because This answer suggests that more joblessness leads to rising pric...
How does an increase in the unemployment rate typically influence monetary policy decisions?
When more people are unemployed, the economy slows down. Other options are incorrect because Some think raising interest rates will help control price...
In an economy experiencing demand-pull inflation, what is the likely relationship between cyclical unemployment and the inflationary gap during a recessionary period?
When demand decreases during a recession, fewer people are needed to produce goods. Other options are incorrect because This option suggests that more...
How does a decrease in aggregate supply contribute to cyclical unemployment during an inflationary gap?
When aggregate supply goes down, it means fewer goods are made. Other options are incorrect because Some might think that higher prices mean people bu...
What is an inflationary gap?
An inflationary gap happens when the economy is producing more than it can sustainably handle. Other options are incorrect because This option suggest...
What is the relationship between inflationary gaps and the unemployment rate?
An inflationary gap happens when the economy is doing really well. Other options are incorrect because This answer suggests that when the economy is s...
What happens to unemployment levels when there is an inflationary gap characterized by increased aggregate demand?
When demand for goods and services rises, businesses need more workers. Other options are incorrect because Some might think that higher prices mean f...
Inflationary gap : lower unemployment :: higher inflation : ?
When inflation is high, businesses often invest more in resources to meet demand. Other options are incorrect because Some might think that higher pri...
When an economy is experiencing an inflationary gap, actual unemployment is __________ than the natural rate, leading to inflationary pressures.
In an inflationary gap, more people have jobs than usual. Other options are incorrect because Some might think that more jobs mean more problems; This...
How does an inflationary gap typically affect unemployment and inflation rates?
An inflationary gap happens when the economy is doing really well. Other options are incorrect because This answer suggests that more jobs lead to hig...
In the context of inflationary gaps, what is the likely impact on unemployment and inflation when the economy operates above its potential output?
When the economy is doing really well, more people have jobs. Other options are incorrect because This answer suggests that people spend less when the...
A country is experiencing a sudden increase in consumer demand due to a government stimulus package. As a result, the unemployment rate drops below the natural rate of unemployment. In the short term, what is the most likely economic outcome related to inflation and employment, considering the principles of inflationary gaps?
When demand for goods and services goes up, prices tend to rise. Other options are incorrect because Some might think that unemployment will keep goin...
What is the primary cause of an inflationary gap in an economy?
An inflationary gap happens when actual unemployment is lower than the natural rate. Other options are incorrect because Some might think that less sp...
A country is experiencing an inflationary gap. Which of the following scenarios best illustrates the economic dynamics at play, particularly in relation to unemployment and inflation expectations?
When people buy more, businesses need to hire more workers. Other options are incorrect because This option suggests cutting spending raises unemploym...
Which of the following statements about inflationary gaps and their effects on unemployment are true? Select all that apply.
Other options are incorrect because This statement is wrong because an inflationary gap happens when unemployment is lower than the natural rate; This...
Arrange the following steps in the correct order to illustrate the impact of an inflationary gap on the economy: A) Higher demand for labor leads to wage increases, B) Resource allocation exceeds full employment levels, C) Increased inflation expectations shift the short-run Phillips curve, D) Actual unemployment falls below the natural rate.
When demand for goods and services rises too high, it creates an inflationary gap. Other options are incorrect because This option suggests that wage ...
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