An economy is at potential GDP and the price level is 100 in the figure. If aggregate demand unexpectedly increases, the inflation rate is _______________.

1.96 percent a year
2 percent a year
0 percent a year
1.02 percent a year

An economy is at potential GDP and the price level is 100 in the figure. If the increase in aggregate demand is expected, then the inflation rate is _________________.

7.0 percent a year
6.5 percent a year
4.7 percent a year
4.9 percent a year

The equation of exchange states that __________________.

M/V = P/Y
MP = VY
MY = PV
MV = PY

The economy is at potential GDP. Now suppose that aggregate demand increases by less than it is anticipated to increase. Other things remaining the same, ____________________.

real GDP increases above potential GDP
real GDP remains at potential GDP
long-run aggregate supply decreases
real GDP decreases below potential GDP

An economy's natural rate of unemployment is 4 percent. The table gives some points on the economy's short-run Phillips curve. When the unemployment rate is 4 percent _________________.

actual inflation is greater than expected inflation
actual inflation is less than expected inflation
and the expected inflation rate is 8 percent a year, the short-run Phillips curve shifts downward
and the inflation rate is 6 percent a year, the short-run and long-run Phillips curves intersect

An economy's natural rate of unemployment is 4 percent. The table gives some points on the economy's short-run Phillips curve. Currently, real GDP equals potential GDP and the value of the GDP deflator is 125. Now, aggregate demand increases by more than expected, and the GDP deflator increases to 135. The economy's unemployment rate _________________.

remains at 4 percent
increases to 5 percent
increases to 6 percent
decreases to 3 percent

An economy's natural rate of unemployment is 4 percent. The table gives some points on the economy's short-run Phillips curve. If the expected inflation rate falls to 4 percent per year, then the _______.

short-run Phillips curve shifts upward
long-run Phillips curve shifts leftward
long-run Phillips curve shifts rightward
short-run Phillips curve shifts downward

If both the unemployment rate and the inflation rate decrease, you predict that ______________________.

the natural rate of unemployment has increased
the natural rate of unemployment has decreased
the expected inflation rate has increased
the economy has moved along its short-run Phillips curve

When the inflation rate is expected to be zero, Steve plans to lend money if the interest rate is at least 4 percent a year and Cindy plans to borrow money if the interest rate is no more than 4 percent a year. Steve and Cindy make a loan agreement for one year at an interest rate of 4 percent a year when inflation is zero. But if Steve and Cindy expect an inflation rate of 1 percent a year, they would be willing to make a loan agreement at _________ a year.

4 percent
5 percent
3 percent
1 percent

When the rate of inflation is expected to be zero, Steve wants to lend money if the interest rate is at least 4 percent per year, and Cindy wants to borrow money if the interest rate is no more than 4 percent per year. Steve and Cindy make a loan agreement for one year anticipating the inflation rate to be 2 percent. During the year, the inflation rate is actually 3 percent. As a result, _______________.

Cindy loses
Steve loses
Steve gains
Steve and Cindy both gain

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