FINAL EXAM INFLATION, CENTRAL BANK, PURCHASING POWER PARITY

QUESTION 1

If prices are perfectly flexible, which of the following can affect GDP? a. Changes in technology

b. Changes in demand

c. Changes in expectations

d. Changes in technology or in expectations

e. None of the above

QUESTION 2

The Phillips curve tells us that inflation will decrease if

a. Unemployment falls

b. Unemployment rises

c. Expected inflation falls

d. Unemployment is above the natural rate or expected inflation falls e. Unemployment rises or expected inflation falls

QUESTION 3

Banks create money because

a. They print it.

b. They take loans from the central bank.

c. They take deposits and use the money to make loans to others. d. They make interbank loans to other banks.

e. They pay interest on deposits.