13. If the equation for a country's Phillips curve is = 0.05 0.8(u 0.05), where is the rate of inflation and u is the unemployment rate, what is the short-run inflation rate when unemployment is 3 percent (0.03)?

A) .066

B) -.056

C) -.066

D) .056

11. The aggregate supply equation is Y = Y + (P EP). Assume that Y is 2,000, = 200, P = 1.12 and EP = 1.00. What is the value of Y?

A) 2,232

B) 2,024

C) 2,400

D) 2,012

9. If policymakers announce in advance how policy will respond to various situations but then renege on their announcements, this a problem of:

A) policy by rule.

B) policy by discretion.

C) time inconsistency of policy.

D) monetary policy.

10. According to the sticky-price model, output will be above the natural level if:

A) firms expect a high price level and the demand for goods is high.

B) the proportion of firms with flexible prices equals the proportion of firms with sticky prices.

C) the price level is above the expected price level.

D) expectations are formed adaptively, but not if expectations are formed rationally.