Question 1

Which of the following is correct concerning the long-run Phillips curve?

Accepted Answer

A)  Its position is determined primarily by monetary factors.
B)  If it shifts right, long-run aggregate supply shifts right.
C)  It cannot be changed by any government policy.
D)  Its position depends on the natural rate of unemployment.E) B) and C)
F) None of the above

Question 2

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate. How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

Accepted Answer

If unemployment is above its natural rat...

Question 3

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." 1 to PC2, policymakers will A) ask whether the shift is temporary or permanent. B) be concerned with how people adjust their expectations of inflation as a result of the shift. C) face, as well, a decision as to whether to accommodate the shock. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-8. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Accepted Answer

A)  ask whether the shift is temporary or permanent.
B)  be concerned with how people adjust their expectations of inflation as a result of the shift.
C)  face, as well, a decision as to whether to accommodate the shock.
D)  All of the above are correct.E) B) and D)
F) A) and D)

Question 4

A policy that raised the natural rate of unemployment would shift

Accepted Answer

A)  both the short-run and the long-run Phillips curves to the right.
B)  the short-run Phillips curve right but leave the long-run Phillips curve unchanged.
C)  the long-run Phillips curve right but leave the short-run Phillips curve unchanged.
D)  neither the long-run Phillips curve nor the short-run Phillips curve right.E) None of the above
F) B) and D)

Question 5

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Accepted Answer

A)  the inflation rate decreases.
B)  the government increases its expenditures.
C)  the Fed increases the money supply.
D)  None of the above is correct.E) None of the above
F) All of the above

Question 6

In 1980, the U.S. economy had an inflation rate of

Accepted Answer

A)  about 1 percent and an unemployment rate of about 7 percent.
B)  less than 4 percent and an unemployment rate of less than 6 percent.
C)  less than 7 percent and an unemployment rate of about 9 percent.
D)  more than 9 percent and an unemployment rate of about 7 percent.E) None of the above
F) A) and D)

Question 7

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Accepted Answer

A)  Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation) .
B)  Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation) .
C)  Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation) .
D)  Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment) .E) A) and B)
F) None of the above

Question 8

Which of the following is downward-sloping?

Accepted Answer

A)  both the long-run Phillips curve and the short-run Phillips curve
B)  neither the long-run Phillips curve nor the short-run Phillips curve
C)  the long-run Phillips curve, but not the short-run Phillips curve
D)  the short-run Phillips curve, but not the long-run Phillips curveE) A) and B)
F) A) and C)

Question 9

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Accepted Answer

A) True 
 B)False

Question 10

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Accepted Answer

A)  unemployment will be higher
B)  unemployment will be lower
C)  inflation will be higher
D)  inflation will be lowerE) All of the above
F) A) and D)

Question 11

Which of the following would cause the price level to fall and output to rise in the short run?

Accepted Answer

A)  an increase in the money supply
B)  a decrease in the money supply
C)  an adverse supply shock
D)  a favorable supply shockE) All of the above
F) B) and C)

Question 12

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Accepted Answer

A)  The change in inflation, but not the change in unemployment is consistent with what a given short-run Phillips curve implies.
B)  The change in unemployment, but not the change in inflation is consistent with what a given short-run Phillips curve implies.
C)  Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.
D)  Neither the change in inflation nor the change in unemployment are consistent with what a given short-run Phillips curve implies.E) B) and C)
F) All of the above

Question 13

Over the long run the Volcker disinflation

Accepted Answer

A)  shifted the short-run and long-run Phillips curves left.
B)  shifted the short-run, but not the long-run Phillips curve left.
C)  shifted the long-run, but not the short-run Phillips curve left.
D)  None of the above is correct.E) A) and D)
F) All of the above

Question 14

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Accepted Answer

A)  the short-run and long-run Phillips curves left.
B)  the short-run and long-run Phillips curves right.
C)  only the short-run Phillips curve left.
D)  only the short-run Phillips curve right.E) B) and C)
F) A) and D)

Question 15

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)  unemployment and inflation are higher.
B)  unemployment and inflation are lower.
C)  unemployment is higher and inflation is lower.
D)  unemployment is lower and inflation is higher.E) B) and C)
F) A) and D)

Question 16

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A)  the short-run Phillips curve shifts left
B)  unemployment falls
C)  the price level rises
D)  output rises.E) A) and D)
F) C) and D)

Question 17

On a given short-run Phillips curve which of the following is not held constant?

Accepted Answer

A)  the level of GDP
B)  the position of the aggregate-supply curve
C)  expected inflation
D)  the expected growth rate of the money supplyE) B) and C)
F) A) and D)

Question 18

Some economists argue suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work. For example, if a government cuts money growth but makes no real fiscal reforms, people will expect the government will eventually need to expand the money supply to pay for its expenditures. Thus, the promise to fight inflation will not be credible. Explain why credibility is important to a reduction in the inflation rate.

Accepted Answer

If people believe that the government re...

Question 19

In his famous article published in an economics journal in 1958, A.W. Phillips

Accepted Answer

A)  used data for the United States to show a negative relationship between the rate of change of the U.S. consumer price index and the U.S. unemployment rate.
B)  used data for the United States to show a negative relationship between the rate of change of wages in the U.S. and the U.S. unemployment rate.
C)  used data for the United Kingdom to show a negative relationship between the rate of change of the U.K. consumer price index and the U.K. unemployment rate.
D)  used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate.E) A) and C)
F) A) and D)

Question 20

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Correct Answer
verified

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Correct Answer
verified

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Correct Answer
verified

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate. How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

Correct Answer
verified
If unemployment is above its natural rat...
View Answer

A policy that raised the natural rate of unemployment would shift

Correct Answer
verified

Which of the following is downward-sloping?

Correct Answer
verified

Which of the following would not be associated with a favorable supply shock?

Correct Answer
verified

On a given short-run Phillips curve which of the following is not held constant?

Correct Answer
verified

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Correct Answer
verified

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Correct Answer
verified

Over the long run the Volcker disinflation

Correct Answer
verified

In 1980, the U.S. economy had an inflation rate of

Correct Answer
verified

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. Faced with the shift of the Phillips curve from PC₁ to PC₂, policymakers will

Correct Answer
verified

Which of the following is correct concerning the long-run Phillips curve?

Correct Answer
verified

Which of the following would cause the price level to fall and output to rise in the short run?

Correct Answer
verified

In his famous article published in an economics journal in 1958, A.W. Phillips

Correct Answer
verified

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Correct Answer
verified

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct Answer
verified

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Correct Answer
verified

Correct Answer
verified
If people believe that the government re...
View Answer

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Correct AnswerverifiedShow Answer

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Correct AnswerverifiedShow Answer

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Correct AnswerverifiedShow Answer

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate. How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

Correct AnswerverifiedIf unemployment is above its natural rat...View AnswerShow Answer

A policy that raised the natural rate of unemployment would shift

Correct AnswerverifiedShow Answer

Which of the following is downward-sloping?

Correct AnswerverifiedShow Answer

Which of the following would not be associated with a favorable supply shock?

Correct AnswerverifiedShow Answer

On a given short-run Phillips curve which of the following is not held constant?

Correct AnswerverifiedShow Answer

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Correct AnswerverifiedShow Answer

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Correct AnswerverifiedShow Answer

Over the long run the Volcker disinflation

Correct AnswerverifiedShow Answer

In 1980, the U.S. economy had an inflation rate of

Correct AnswerverifiedShow Answer

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Which of the following would cause the price level to fall and output to rise in the short run?

Correct AnswerverifiedShow Answer

In his famous article published in an economics journal in 1958, A.W. Phillips

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Correct AnswerverifiedShow Answer

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct AnswerverifiedShow Answer

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf people believe that the government re...View AnswerShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
If unemployment is above its natural rat...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. Faced with the shift of the Phillips curve from PC₁ to PC₂, policymakers will

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If people believe that the government re...
View Answer