QUESTION 4

1. According to the text, which of the following can be used to characterize potential output?

i. Assume a perfectly smooth trend is passing through the quarter-to-quarter movements in the real GDP.

ii. Take averages of the surrounding actual GDP numbers.

iii. Gather current data from statistical agencies, such as the Bureau of Economic Analysis.

	A.	i only
	B.	ii only
	C.	ii and iii
	D.	i and ii
	E.	iii only

1. In 1979, the inflation rate reached about 14 percent. The Federal Reserve ________ interest rates, sending the economy into a(n) ________. When doing so, the Federal Reserve knew this would be the case because of ________.

	A.	raised; expansion; the Phillips curve
	B.	raised; recession; the Phillips curve
	C.	raised; recession; Okuns law
	D.	lowered; recession; the Phillips curve
	E.	lowered; expansion; the Phillips curve

QUESTION 8

According to the text, the slope of the Phillips curve in the United States is about ________. Thus, if the gap is 6 percent, the change in inflation would be ________ percent.

	A.	1/4; 1.5
	B.	1/3; 12
	C.	1/3; 2
	D.	1/2; 3
	E.	1/2; 12