Economics USA: 21st Century Edition

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1. Which of the following statements is MOST accurate? Stagflation is:

   	a phenomenon peculiar to the U.S., first observed during the 1960s.
   	a worldwide phenomenon, first noted by the classical economists.
   	an accepted part of American and European economics since the turn of the century.
   	a condition common to numerous industrialized nations since the early 1970s.

   a condition common to numerous industrialized nations since the early 1970s.

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2. The term “income policy” is another name for:

   	wage and price guidelines.
   	economic sanctions.
   	welfare programs.
   	fiscal policy.

   wage and price guidelines.

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3. As a result of the 1962 confrontation between President Kennedy and the steel industry, U.S. Steel ultimately:

   	won the right to set prices without government interference.
   	lost a major share of its market to other industry rivals.
   	became the new industry price leader by setting voluntary limits on annual price increases.
   	had to rescind price increases when other steel producers failed to follow its lead.

   had to rescind price increases when other steel producers failed to follow its lead.

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4. Significant increases in price will:

   

   	shift the aggregate supply curve to AS1.
   	shift the aggregate supply curve to AS2.
   	shift the aggregate demand curve to AD1.
   	leave both aggregate supply and demand unchanged.

   shift the aggregate supply curve to AS1.

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5. The Fed could minimize the impact of price increases on unemployment by increasing the money supply to shift aggregate demand to AD1. In that case the price level would:

   

   	decline to OP4.
   	decline to OP1.
   	rise to OP3.
   	rise to OP2.

   rise to OP3.

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6. During the early 1970s, UAW workers insisted upon COLAs: cost of living adjustment contracts. Which of the following probably BEST describes the results of that decision?

   	Virtually all workers benefited, with long-awaited cost of living increases that improved lifestyles throughout the industry.
   	Only a handful of workers benefited since the COLAs were not granted universally.
   	Initially, many workers benefited from higher salaries, but as the industry laid off workers to cut costs, many suffered.
   	The auto industry was the real beneficiary since the COLAs gave it the excuse it needed to cut labor costs and raise profits.

   Initially, many workers benefited from higher salaries, but as the industry laid off workers to cut costs, many suffered.

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