Greetings. Please write your name on the line above and write your quiz number but NOT your name on the cover of your blue book. You must turn in BOTH your test copy AND your blue book to receive a passing grade for the quiz.
    Please answer each of the quiz questions as well as you can. Available quiz points are distributed in proportion to the recommended time limits listed in the quiz. The recommended times sum to 45 minutes, but you will be given 55 minutes to complete the quiz. Do the best you can on each question, and keep in mind that plenty of partial credit is available.

Don't forget the Oxy spirit of honor. Please do NOT discuss this quiz AT ALL until 12:30 this afternoon. Good luck!

    1. (6 minutes) Between 1980 and 1982, real GDP (in 1992 dollars) rose from $4615 billion to $4620 billion.
    a. All else equal, based on the real GDP information, what would you predict for the direction of the change in the unemployment rate from 1980 to 1982? Explain briefly.
    b. Consider the following labor force information:

    2. (6 minutes) Consider the following wage and CPI information:

    3. (6 minutes) Use appropriate words or phrases to fill in the following blanks in your blue book (hint: this is taken from the worksheet, "The basic AD/AS Macro model: Recap"):
    a. In the AD/AS diagram, Y stands for ______ and  P stands for ______.
    b. Types of unemployment: At full employment, ______ unemployment = 0, but ______ unemployment and ______ unemployment remain.
    c. The equation for aggregate demand is AD = ______.
    d. Two of the three reasons that AD slopes downward are ______ and ______.
    e. The reason that SRAS slopes upward is ______.
    f. Two causes for a simultaneous shift of both SRAS and LRAS are ______ and ______.
    g. What change causes SRAS to shift without shifting LRAS? ______

    4. (15 minutes) Consider the attached worksheet of data for the self-correction episodes we covered in class.
    a. Which episode was your team responsible for during the self-correction workshop?
    b. For one of the other two episodes covered during the workshop:
    (1) Illustrate in an AD/SRAS/LRAS diagram the U.S. macroeconomy in the initial year of the episode. Be sure to use actual values from the table in your diagram.
    (2) Illustrate the episode's shock in your diagram, again using the actual second-year values reported for the episode.
    (3) Indicate in the diagram the recessionary or inflationary gap that results from the shock.
    (4) Carefylly explain how the self-correction mechanism is supposed to work to eliminate the recessionary or inflationary gap, and illustrate how it appears in your diagram. Indicate the direction each of the following should have changed as a result of self-correction: real GDP, the unemployment rate, and the price level.
    (5) Compare your predictions to the actual changes reported for the third year of the episode. For any prediction which fails, briefly describe one reason that might account for why it failed.

    5. (12 minutes) Currently, the U.S. unemployment rate is 4.7%.
    a. Depict the current U.S. macroeconomic equilibrium in an AD/SRAS/LRAS diagram. Use the label "a" for your initial equilibrium and as a subscript on your initial AD, SRAS and LRAS curves. For your LRAS curve, assume that the full-employment unemployment rate is about 5.5%.
    b. In your diagram, show how self-correction would restore the economy's full-employment
equilibrium. Use the label "b" for your new equilibrium and for any new curves you draw. Would self-correction be inflationary? How can you tell?
    c. Illustrate instead how the current recession in Southeast Asia could restore the U.S. economy to a full-employment equilibrium (again start from point "a" your diagram). Use the label "c" for your new equilibrium and for any new curves you draw. Would this be inflationary? How can you tell?
    d. Finally, suppose that the full-employment unemployment rate for the U.S. is actually 4.7%. Illustrate how this would affect your diagram. Use the label "d" for any new curves you draw.