Chapter 3
Inflation, Unemployment and Expectations
Multiple Choice Questions
1. Phillips curve explains that relation between inflation and unemployment is
(a) Inverse
(b) direct
(c) Neither of the two
Answer: (a) Inverse
2. Phillips curves describes the inflation-unemployment trade -off in the
(a) Long period
(b) Short period
(c) Both of them
Answer: (b) Short period.
3. The long run phillips curve in a
(a) Vertical line
(b) Horizontal line
(c) Negatively sloping curves
Answer: (a) Vertical line
4. The natural rate of hypothesis involves
(a) Adaptive expectations
(b) Rational expectations
(c) Both of them
Answer: (c) Both of them
5. Given rational expectational and anticipated policy change of monetary expansions, the level of employment
(a) Increase
(b) Remains unchanged
(c) Neither of them
Answer: (b) Remains unchanged.
Very Short Answer type Questions
1. What is Phillips curves ?
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2. Define inflation-umemployment trade-off.
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3. What is natural rate ?
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4. What is meant by adaptive expectations ?
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5. What is meant by rational expectations ?
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Short Answer Type Questions
1. Explain the reasons for inverse relation between inflation and unemployment.
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2. How dose phillips curve explain unemployment-inflation trade -off ?
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3. Explain Friedman's natural rate hypothesis.
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4. Explain briefly rational expectations hypothesis.
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Long Answer Type Questions
1. Explain clearly the trade-off between inflation and unemployment through Phillips curve.
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2. How does natural rate hypothesis explain the unemployment-inflation relationship ?
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3. Given rational expectations, analyse the effect of monetary expansion on wages and employment.
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Very Long Answer Type Questions
1. Explain the concept of philips curve. Discuss its empirical validity.
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2.Explain clearly friedman's natural rate hypothesis.
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3. What is the nature of expectations involved in the natural rate hypothesis ?
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4. Explain the effect of rational expectations on aggregate demand when policy change is anticipated or unanticipated.
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Question Type- Bhabesh Bora
Post ID : DABP005163
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