Modules 34-35

Question 1

Represents the negative short-run relationship between the unemployment rate and the inflation rate

Answer 1

Short-run Phillips curve

Question 2

The unemployment rate at which inflation does not change over time

Answer 2

Nonaccelerating inflation rate of unemployment (NAIRU)

Question 3

Shows the relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience

Answer 3

Long-run Phillips curve

Question 4

Reduction in aggregate demand arising from the increase in the real burden of outstanding debt caused by deflation

Answer 4

Debt deflation

Question 5

There is a __ on the nominal interest rate, it cannot go below zero

Answer 5

Zero bound

Question 6

A situation in which conventional monetary policy is ineffective because nominal interest rates are up against the zero bound

Answer 6

Liquidity trap

Question 7

Focuses on the ability of shifts in aggregate demand to influence aggregate output in the short run

Answer 7

Keynesian economics

Question 8

The use of monetary and fiscal policy to smooth out the business cycle

Answer 8

Macroeconomic policy activism

Question 9

Assets that GDP will grow steadily if the money supply grows steadily

Answer 9

Monetarism

Question 10

The use of changes in the interest rate or the money supply by the central bank to stabilize the economy

Answer 10

Discretionary monetary policy

Question 11

Formula that determines the bank’s actions

Answer 11

Monetary policy rule

Question 12

Emphasizes the positive relationship between the price level and the money supply. It relies on the velocity equation (M x V = P x Y)

Answer 12

Quantity Theory of Money

Question 13

The ratio of nominal GDP to the money supply, it is a measure of the number of times the average dollar bill is spent per year

Answer 13

Velocity of money

Question 14

To avoid accelerating inflation over time, the unemployment rate must be high enough that the actual inflation rate equals the expected inflation rate

Answer 14

Natural rate hypothesis

Question 15

Political use macroeconomic policy to serve political ends

Answer 15

Political business cycle

Question 16

An approach to the business cycle that returns the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output

Answer 16

New classical macroeconomics

Question 17

the view that individuals and firms make decisions optimally, using all information available

Answer 17

Rational expectations

Question 18

Market imperfections can lead to price stickiness for the economy as a whole

Answer 18

New Keynesian economics

Question 19

Claims that fluctuations in the rate of growth of total factor productivity cause the business cycle.

Answer 19

real business cycle theory