20 flashcards · Shared on 19 August 2026 by AtomAI Library
Flip each card to check yourself.
What is inflation?
A sustained increase in the general price level
What is inflation?
A sustained increase in the general price level
If the consumer price index rises from 120 to 126 over one year, what is the annual inflation rate?
5%
Which statement best describes demand-pull inflation?
Prices rise because aggregate demand grows faster than productive capacity
What is cost-push inflation?
Inflation caused by increases in firms' production costs
Which person is counted as unemployed in standard labor market statistics?
A person without a job who is available for work and actively seeking employment
How is the unemployment rate calculated?
Unemployed people divided by the labor force, multiplied by 100
Which type of unemployment results from people moving between jobs or entering the labor market?
Frictional unemployment
Structural unemployment occurs mainly when:
Workers' skills or locations do not match available jobs
What is cyclical unemployment?
Unemployment caused by downturns in the business cycle
In the short-run Phillips curve, what relationship is usually shown when inflation expectations are fixed?
Higher inflation is associated with lower unemployment
Why can expansionary demand policy reduce unemployment in the short run?
It raises aggregate demand, output, and firms' demand for labor
What does the natural rate of unemployment represent?
The unemployment rate consisting mainly of frictional and structural unemployment
What is the NAIRU?
The unemployment rate consistent with stable inflation
Why is the long-run Phillips curve usually drawn as vertical?
Unemployment returns to its natural rate once expectations and wages adjust
What is likely to happen if policymakers repeatedly try to keep unemployment below its natural rate using expansionary demand policy?
Inflation may keep accelerating as expectations adjust
How does an increase in expected inflation affect the short-run Phillips curve?
It shifts the curve upward, raising inflation at every unemployment rate
Which situation is described as stagflation?
High inflation combined with high unemployment or weak output
What effect can an adverse supply shock, such as a sharp rise in oil prices, have on inflation and unemployment?
It can raise inflation while also raising unemployment
A discouraged worker stops searching for work after being unable to find a job. What is the direct effect on standard labor statistics, all else equal?
Unemployment falls and the labor force falls
What is disinflation?
A reduction in the rate of inflation