IS-LM Model and Aggregate Demand Curve Quiz
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Questions and Answers

In the IS-LM-Aggregate Supply model, the natural rate of unemployment is associated with:

  • The level of unemployment that exists when the economy is at its potential output (correct)
  • The level of unemployment when the economy is in an expansionary phase
  • The level of unemployment when the economy experiences high inflation
  • The level of unemployment when the economy is in recession

    • Friedman's Expectation Model is based on the idea that individuals form their expectations of future inflation based on:

  • International trade agreements
  • Government policies
  • Labor market conditions
  • Past inflation rates (correct)

    • Which concept suggests that individuals form their expectations of future economic conditions based on past experiences and past information?

  • Tobin's Modified Phillips Curve
  • Rational Expectations
  • Flexible Prices
  • Adaptive Expectations (correct)

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