Question 1

Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

Accepted Answer

A)   aggregate demand to the right.
B)   aggregate demand to the left.
C)   aggregate supply to the right.
D)   aggregate supply to the left.E) A) and C)
F) C) and D)

Question 2

France has a higher natural rate of unemployment than the United States. This suggests that

Accepted Answer

A)   France is at a higher point on its long-run Phillips curve and so has higher inflation than the United States.
B)   France is at a lower point on its long-run Phillips curve and so has lower inflation than the United States.
C)   France's Phillips curve is to the left of that of the United States, possibly because they have higher inflation.
D)   France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.E) C) and D)
F) B) and D)

Question 3

Which of the following played a role in depressing aggregate demand in 2001?

Accepted Answer

A)   the end of a stock-market bubble
B)   corporate accounting scandals
C)   the terrorist attacks on September 11 of that year
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 4

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 5

In the late 1960s, Milton Friedman and Edmund Phelps argued that

Accepted Answer

A)   the trade-off between inflation and unemployment did not apply in the long run This claim is consistent with monetary neutrality in the long run.
B)   the trade-off between inflation and unemployment did not apply in the long run. This claim is inconsistent with monetary neutrality in the long run.
C)   the trade-off between inflation and unemployment applied in both the short run and the long run. This claim is consistent with monetary neutrality in the long run.
D)   the trade-off between inflation and unemployment applied in both the short run and the long run. This claim is inconsistent with monetary neutrality in the long run.E) B) and C)
F) A) and D)

Question 6

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) , the variable a is a parameter that measures how much

Accepted Answer

A)   actual inflation responds to expected inflation.
B)   expected inflation responds to actual inflation.
C)   the natural rate of unemployment responds to unexpected inflation.
D)   actual unemployment responds to unexpected inflation.E) All of the above
F) A) and D)

Question 7

The long-run Phillips curve would shift to the right if

Accepted Answer

A)   the money supply growth rate decreased or if labor markets become more flexible.
B)   the money supply growth rate decreased, but not if labor markets become more flexible.
C)   labor markets become more flexible, but not if the money supply growth rate decreased.
D)   None of the above is correct.E) A) and D)
F) A) and B)

Question 8

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the short­run effects of the Fed's policy.

Accepted Answer

The economy moves al...

Question 9

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

Accepted Answer

A)   No government policy, including changes in the money supply growth rate, can change the natural rate of unemployment.
B)   Changes in the money supply growth rate are the only means by which government policy can change the natural rate of unemployment.
C)   Monetary policy cannot change the natural rate of unemployment, but other government policies can.
D)   Monetary policy and other government policies can shift the long-run Phillips curve.E) None of the above
F) C) and D)

Question 10

Figure 35-4. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD)  curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis.  
-Refer to Figure 35-4. What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   output
D)   the interest rateE) None of the above
F) B) and C)

Question 11

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

Accepted Answer

A)   unemployment rate.
B)   inflation rate.
C)   growth rate of real national income.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 12

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance undertakes a public relations campaign to convince people that it will soon change monetary policy to reduce inflation to 12.5%. If Flosserlanders believe their government then which, if any, curves)  shift left?

Accepted Answer

A)   the short-run and the long-run Phillips curve
B)   the short-run but not the long run Phillips curve
C)   the long-run but not the short-run Phillips curve
D)   neither the short-run nor the long-run Phillips curveE) A) and B)
F) None of the above

Question 13

The natural rate of unemployment

Accepted Answer

A)   is constant over time.
B)   varies over time, but can't be changed by the government.
C)   is the socially desirable rate of unemployment.
D)   does not depend on the rate at which the Fed increases the money supply.E) None of the above
F) A) and B)

Question 14

An adverse supply shock will shift short-run aggregate supply

Accepted Answer

A)   right, making prices rise.
B)   left, making prices rise.
C)   right, making prices fall.
D)   left, making prices fall.E) A) and C)
F) All of the above

Question 15

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Accepted Answer

A)   rises. As inflation expectations adjust, the short-run Phillips curve shifts right.
B)   rises. As inflation expectations adjust, the short-run Phillips curve shifts left.
C)   falls. As inflation expectations adjust, the short-run Phillips curve shifts right.
D)   falls. As inflation expectations adjust, the short-run Phillips curve shifts left.E) None of the above
F) A) and B)

Question 16

An increase in the price of oil shifts the

Accepted Answer

A)   short-run Phillips curve right and the unemployment rate rises.
B)   short-run Phillips curve right and the unemployment rate falls.
C)   short-run Phillips curve left and the unemployment rate rises.
D)   short-run Phillips curve left and the unemployment rate falls.E) A) and B)
F) B) and D)

Question 17

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) A) and C)
F) C) and D)

Question 18

If a central bank increases the money supply growth rate, then in the short run

Accepted Answer

A)   unemployment rises. In the long run the short-run Phillips curve shifts right.
B)   unemployment rises. In the long run the short-run Phillips curve shifts left.
C)   unemployment falls. In the long run the short-run Phillips curve shifts right.
D)   unemployment falls. In the long run the short-run Phillips curve shifts left.E) A) and D)
F) A) and C)

Question 19

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Accepted Answer

In the short run, unemployment will rise...

Question 20

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Accepted Answer

The sacrifice ratio will be smaller beca...

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

The natural rate of unemployment

Correct Answer
verified

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

Correct Answer
verified

An adverse supply shock will shift short-run aggregate supply

Correct Answer
verified

Correct Answer
verified

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the shortrun effects of the Fed's policy.

Correct Answer
verified
The economy moves al...
View Answer

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

Correct Answer
verified

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) , the variable a is a parameter that measures how much

Correct Answer
verified

An increase in the price of oil shifts the

Correct Answer
verified

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Correct Answer
verified
The sacrifice ratio will be smaller beca...
View Answer

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct Answer
verified
In the short run, unemployment will rise...
View Answer

In the late 1960s, Milton Friedman and Edmund Phelps argued that

Correct Answer
verified

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct Answer
verified

France has a higher natural rate of unemployment than the United States. This suggests that

Correct Answer
verified

The long-run Phillips curve would shift to the right if

Correct Answer
verified

If a central bank increases the money supply growth rate, then in the short run

Correct Answer
verified

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

Correct Answer
verified

Which of the following played a role in depressing aggregate demand in 2001?

Correct Answer
verified

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

Correct Answer
verified

Correct Answer
verified

Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

Correct Answer
verified

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

The natural rate of unemployment

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An adverse supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the short­run effects of the Fed's policy.

Correct AnswerverifiedThe economy moves al...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) , the variable a is a parameter that measures how much

Correct AnswerverifiedShow Answer

An increase in the price of oil shifts the

Correct AnswerverifiedShow Answer

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Correct AnswerverifiedThe sacrifice ratio will be smaller beca...View AnswerShow Answer

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct AnswerverifiedIn the short run, unemployment will rise...View AnswerShow Answer

In the late 1960s, Milton Friedman and Edmund Phelps argued that

Correct AnswerverifiedShow Answer

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct AnswerverifiedShow Answer

France has a higher natural rate of unemployment than the United States. This suggests that

Correct AnswerverifiedShow Answer

The long-run Phillips curve would shift to the right if

Correct AnswerverifiedShow Answer

If a central bank increases the money supply growth rate, then in the short run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following played a role in depressing aggregate demand in 2001?

Correct AnswerverifiedShow Answer

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the shortrun effects of the Fed's policy.

Correct Answer
verified
The economy moves al...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The sacrifice ratio will be smaller beca...
View Answer

Correct Answer
verified
In the short run, unemployment will rise...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified