Question 1

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by one percentage point.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following shifts the long-run Phillips curve left?

Accepted Answer

A)   both an increase in the inflation rate and a decrease in the minimum wage rate
B)   an increase in the inflation rate,but not a decrease in the minimum wage rate
C)   a decrease in the minimum wage rate,but not an increase in the inflation rate
D)   neither a decrease in the minimum wage rate nor an increase in the inflation rateE) A) and C)
F) B) and D)

Question 3

After an oil price shock,which of the following would move unemployment back towards its natural rate?

Accepted Answer

A)   the Fed sells bonds
B)   the government raises taxes
C)   the government increases expenditures
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Accepted Answer

A) True 
 B)False

Question 6

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending.According to the Phillips curve,in the short run these policies should have

Accepted Answer

A)   reduced inflation and unemployment.
B)   raised inflation and unemployment.
C)   reduced inflation and raised unemployment.
D)   raised inflation and reduced unemployment.E) A) and B)
F) A) and C)

Question 7

What is meant by the natural rate of unemployment?

Accepted Answer

It is the rate of un...

Question 8

If asset prices fall and inflation expectations remain unchanged,what happens to inflation and unemployment? Defend your answer.

Accepted Answer

Inflation falls and unemployment rises.T...

Question 9

Suppose that the money supply increases.In the short run,this increases prices according to

Accepted Answer

A)   both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B)   neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C)   the short-run Phillips curve,but not the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model but not the short-run Phillips curve.E) C) and D)
F) A) and B)

Question 10

One determinant of the long-run average unemployment rate is the

Accepted Answer

A)   market power of unions,while the inflation rate depends primarily upon government spending.
B)   minimum wage,while the inflation rate depends primarily upon the money supply growth rate.
C)   rate of growth of the money supply,while the inflation rate depends primarily upon the market power of unions.
D)   existence of efficiency wages,while the inflation rate depends primarily upon the extent to which firms are competitive.E) A) and B)
F) A) and C)

Question 11

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Accepted Answer

A)   short run,and the natural rate is the socially optimal rate of unemployment.
B)   long run,and the natural rate is the socially optimal rate of unemployment.
C)   short run,and the natural rate is not necessarily the socially optimal rate of unemployment.
D)   long run,and the natural rate is not necessarily the socially optimal rate of unemployment.E) B) and D)
F) C) and D)

Question 12

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)   reduced both unemployment and inflation.
B)   reduced inflation significantly,but at the cost of a severe recession.
C)   reduced unemployment significantly,but at the cost of higher inflation.
D)   raised both unemployment and inflation.E) A) and D)
F) C) and D)

Question 13

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) A) and B)
F) A) and C)

Question 14

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Accepted Answer

A)   both higher inflation and higher unemployment in the long run.
B)   higher inflation and no change in unemployment in the long run.
C)   the same inflation rate and lower unemployment in the long run.
D)   higher inflation and lower unemployment in the long runE) None of the above
F) A) and B)

Question 15

Suppose the Federal Reserve makes monetary policy more expansionary.In the long run

Accepted Answer

A)   both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)   inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)   inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)   inflation is lower and unemployment is the same as it was prior to the change in policy.E) C) and D)
F) B) and D)

Question 16

In the long run,an increase in the money supply growth rate

Accepted Answer

A)   shifts both the long-run and the short-run Phillips curves right.
B)   shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)   shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)   None of the above is correct.E) B) and C)
F) A) and B)

Question 17

In the long run,the natural rate of unemployment depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 18

Figure 22-5
Use the graph below to answer the following questions. 
-Refer to Figure 22-5.The money supply growth rate is greatest at

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   F.E) A) and C)
F) B) and C)

Question 19

Other things the same,an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Accepted Answer

A) True 
 B)False

Question 20

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 AS2,but it could not explain the shift of the Phillips curve from PC1 to PC2. B)  the shift of the Phillips curve from PC1 to PC2,but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. C)  both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. D)  neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2." class="answers-bank-image d-inline" rel="preload" > 1 to AS2,but it could not explain the shift of the Phillips curve from PC1 to PC2. B)  the shift of the Phillips curve from PC1 to PC2,but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. C)  both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. D)  neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-8.A significant increase in the world price of oil could explain

Accepted Answer

A)   the shift of the aggregate-supply curve from AS1 to AS2,but it could not explain the shift of the Phillips curve from PC1 to PC2.
B)   the shift of the Phillips curve from PC1 to PC2,but it could not explain the shift of the aggregate-supply curve from AS1 to AS2.
C)   both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2.
D)   neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2.E) A) and B)
F) A) and C)

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

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

After an oil price shock,which of the following would move unemployment back towards its natural rate?

Correct AnswerverifiedShow Answer

One determinant of the long-run average unemployment rate is the

Correct AnswerverifiedShow Answer

Which of the following shifts the long-run Phillips curve left?

Correct AnswerverifiedShow Answer

In the long run,an increase in the money supply growth rate

Correct AnswerverifiedShow Answer

Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5.The money supply growth rate is greatest at

Correct AnswerverifiedShow Answer

The restrictive monetary policy followed by the Fed in the early 1980s

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.A significant increase in the world price of oil could explain

Correct AnswerverifiedShow Answer

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Correct AnswerverifiedShow Answer

If asset prices fall and inflation expectations remain unchanged,what happens to inflation and unemployment? Defend your answer.

Correct AnswerverifiedInflation falls and unemployment rises.T...View AnswerShow Answer

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by one percentage point.

Correct AnswerverifiedShow Answer

What is meant by the natural rate of unemployment?

Correct AnswerverifiedIt is the rate of un...View AnswerShow Answer

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending.According to the Phillips curve,in the short run these policies should have

Correct AnswerverifiedShow Answer

Suppose that the money supply increases.In the short run,this increases prices according to

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve makes monetary policy more expansionary.In the long run

Correct AnswerverifiedShow Answer

In the long run,the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct AnswerverifiedShow Answer

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Inflation falls and unemployment rises.T...
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It is the rate of un...
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