1. A good reason for policymakers to pursue a goal of stabilizing economic activity is that ________.

in a stable economy, there is little or no structural inflation

high unemployment causes human misery and lost output

high inflation is always accompanied by high variability of inflation

all of the above

none of the above

2.According to Okun's law, an increase in which of the following is associated with an increase in unemployment?

inflation

autonomous expenditure

output

potential output

expected inflation

3. An asset is ________.

anything that can be owned and has value

a debt for the owner of the asset

equal in value to its corresponding liabilities and net worth

a net outflow from the revenues of a producing firm

4.An increase in financial frictions results in ________.

an increase in output and inflation

a decline in the real interest rates faced by households and firms

a rise in the interest rate set by monetary policy

a decline in the interest rate set by monetary policy

5. Between 2007 and 2009, which of the following occurred in the United States, but notin the United Kingdom?

a negative supply shock

a negative demand shock

a sharp increase in financial frictions

a negative rate of inflation (i.e., deflation)

an increase in unemployment

6.If the central bank did notfollow the Taylor principle, an increase in inflation would lead to ________.

a decrease in the nominal interest rate

a decrease in aggregate expenditure

an increase in inflation

all of the above

none of the above

7.In the 1960s, the Phillips curve was ________.

suggestive of a temporary trade-off between inflation and unemployment

consistent with a positive relationship between inflation and unemployment

a very popular explanation for inflation fluctuations

all of the above

none of the above