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Why is the distinction between cyclical, frictional, and structural unemployment important?
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Define the unemployment rate.
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Explain Okun’s law.
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Illustrate demand-pull inflation.
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Illustrate cost-push inflation.
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What is the Keynesian dilemma that arises with stagflation?
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What is the core or inertial rate of inflation?
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Why are inflationary expectations important?
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What are adaptive expectations?
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Illustrate how adaptive expectations lead to an inertial inflation rate.
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What relationship does the Phillips Curve purport to illustrate?
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What happened in the 1970s to shake economists’ faith in the Phillips Curve?
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What is the standard explanation of the Phillips Curve breakdown?
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According to the Monetarists, the disappearance of the Phillips Curve in the 1970s may best be explained through what two things?
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What is the natural or lowest sustainable rate of unemployment?
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What are the policy implications of the Monetarist’s natural rate theory, particularly with regard to Keynesian activism?
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Is the natural rate of unemployment constant?
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Illustrate an inflationary spiral from the Monetarists’ perspective. How do the Monetarists stop an inflationary spiral?
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Contrast the traditional Keynesian versus Monetarist approaches to wringing inflation out of the economy. Why does neither have political appeal?
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Illustrate how Supply-side economics offers a very painless way to avoid both the Keynesian stagflation dilemma and the bitter Monetarist cure for an inflationary spiral.
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Illustrate the Laffer Curve.
