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Chapter 13: A State-Centered Approach to Monetary and Exchange-Rate Policies Multiple Choice Questions 1. The natural rate of unemployment is the rate of unemployment a) to which an economy will return after a recession or a boom. b) which is determined by the country’s minimum wage. c) which could be zero. d) which cannot be raised by labor market institutions. e) which is determined by the rate of inflation. Answer: a 2. The accelerationist principle stipulates that a government determined to use monetary policy to keep a) employment below the natural rate for any lengthy period will have to continually increase the rate of inflation to do so. b) unemployment below the natural rate for any lengthy period will have to continually increase the rate of inflation to do so. c) unemployment below the natural rate for a short period will have to continually increase the rate of inflation to do so. d) unemployment below the natural rate for any short period will have to continually decrease the rate of inflation to do so. e) unemployment above the natural rate for any lengthy period will have to continually increase the rate of inflation to do so. Answer: b 3. During the period 1984-1994 in the United States, the rate of inflation was, on average, about a) 2.7%. b) 3.2%. c) 4.1%. d) 5.5%. e) 6.5%. Answer: e 4. According to Oatley, a) lower inflation during the 1970s did not reduce unemployment relative to the 1960s. b) higher inflation in the 1980s did not raise unemployment relative to the 1970s.
