Question 1

Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output has to be given up in order to reduce the inflation rate from

Accepted Answer

A)  8 percent to 4 percent.
B)  8 percent to 5 percent.
C)  7 percent to 5 percent.
D)  7 percent to 6 percent.E) B) and C)
F) None of the above

Question 2

Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 35-3. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the right-hand graph. The price level in the year 2018 is

Accepted Answer

A)  155.56.
B)  159.00.
C)  163.50.
D)  170.04.E) B) and C)
F) A) and C)

Question 3

Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops. Which of the following would you expect to occur as a result of this favorable supply shock?

Accepted Answer

A)  The short-run Phillips curve will shift to the right and the unemployment rate will increase.
B)  The short-run Phillips curve will shift to the right and the unemployment rate will decrease.
C)  The short-run Phillips curve will shift to the left and the unemployment rate will increase.
D)  The short-run Phillips curve will shift to the left and the unemployment rate will decrease.E) None of the above
F) All of the above

Question 4

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)  the unemployment rate will be below its natural rate whenever inflation is negative.
B)  the unemployment rate will be below its natural rate whenever inflation is positive.
C)  the unemployment rate will be below its natural rate only if inflation is less than expected.
D)  the unemployment rate will be below its natural rate only if inflation is greater than expected.E) C) and D)
F) A) and B)

Question 5

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Accepted Answer

Eventually the economy moves back to the...

Question 6

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

Question 7

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

Accepted Answer

A)  raises expected inflation so the short-run Phillips curve shifts right.
B)  raises expected inflation so the short-run Phillips curve shifts left.
C)  reduces expected inflation so the short-run Phillips curve shifts left.
D)  None of the above is correct.E) C) and D)
F) A) and C)

Question 8

Figure 35-1. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 35-1. What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)  the wage rate
B)  the inflation rate
C)  employment
D)  outputE) None of the above
F) All of the above

Question 9

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Accepted Answer

A)  0.
B)  1.
C)  4.
D)  5.E) A) and C)
F) B) and C)

Question 10

As the aggregate demand curve shifts leftward 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 D)
F) B) and C)

Question 11

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Accepted Answer

A)  the long-run Phillips curve and the long-run aggregate supply curve
B)  the long-run Phillips curve but not the long-run aggregate supply curve
C)  the long-run aggregate supply curve but not the long-run Phillips curve
D)  neither the long-run Phillips curve nor the long-run aggregate supply curveE) A) and C)
F) B) and D)

Question 12

Suppose that the money supply decreases. 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 according to the aggregate demand and aggregate supply model.
D)  the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.E) B) and C)
F) A) and C)

Question 13

The sacrifice ratio is the

Accepted Answer

A)  sum of the inflation and unemployment rates.
B)  inflation rate divided by the unemployment rate.
C)  number of percentage points annual output falls for each percentage point reduction in inflation.
D)  number of percentage points unemployment rises for each percentage point reduction in inflation.E) None of the above
F) A) and B)

Question 14

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Accepted Answer

A)  above its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment.
B)  above its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.
C)  below its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment.
D)  below its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.E) A) and C)
F) A) and B)

Question 15

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, curve(s)  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 D)
F) None of the above

Question 16

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Accepted Answer

A)  Inflation expectations rise which shifts the short-run Phillips curve to the right.
B)  Inflation expectations rise which shifts the short-run Phillips curve to the left.
C)  Inflation expectations fall which shifts the short-run Phillips curve to the right.
D)  Inflation expectations fall which shifts the short-run Phillips curve to the left.E) None of the above
F) All of the above

Question 17

Samuelson and Solow believed that the Phillips curve

Accepted Answer

A)  implied that low unemployment was associated with low inflation.
B)  indicated that the aggregate supply and aggregate demand model was incorrect.
C)  offered policymakers a menu of possible economic outcomes from which to choose.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 18

Country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's. In the long run as compared to country B, country A will have

Accepted Answer

A)  lower unemployment and higher inflation
B)  higher unemployment and higher inflation
C)  lower unemployment and lower inflation
D)  None of the above is necessarily correct.E) A) and C)
F) None of the above

Question 19

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

Accepted Answer

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

Question 20

Figure 35-7
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-7. The economy would move from C to B

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly.
B)  in the short run if money supply growth decreased unexpectedly.
C)  in the long run if money supply growth increases.
D)  in the long run if money supply growth decreases.E) B) and D)
F) C) and D)

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

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

Correct Answer
verified

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Correct Answer
verified

The sacrifice ratio is the

Correct Answer
verified

Figure 35-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 35-1. What is measured along the horizontal axis of the left-hand graph?

Correct Answer
verified

Samuelson and Solow believed that the Phillips curve

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Correct Answer
verified

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Correct Answer
verified

Correct Answer
verified

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Correct Answer
verified
Eventually the economy moves back to the...
View Answer

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

Correct Answer
verified

Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops. Which of the following would you expect to occur as a result of this favorable supply shock?

Correct Answer
verified

Which of the following is downward-sloping?

Correct Answer
verified

According to Friedman and Phelps's analysis of the Phillips curve,

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

Correct Answer
verified

Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output has to be given up in order to reduce the inflation rate from

Correct Answer
verified

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Correct Answer
verified

Country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's. In the long run as compared to country B, country A will have

Correct Answer
verified

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

Correct Answer
verified

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

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

Correct AnswerverifiedShow Answer

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Correct AnswerverifiedShow Answer

The sacrifice ratio is the

Correct AnswerverifiedShow Answer

Figure 35-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 35-1. What is measured along the horizontal axis of the left-hand graph?

Correct AnswerverifiedShow Answer

Samuelson and Solow believed that the Phillips curve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Correct AnswerverifiedShow Answer

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Correct AnswerverifiedEventually the economy moves back to the...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops. Which of the following would you expect to occur as a result of this favorable supply shock?

Correct AnswerverifiedShow Answer

Which of the following is downward-sloping?

Correct AnswerverifiedShow Answer

According to Friedman and Phelps's analysis of the Phillips curve,

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

Correct AnswerverifiedShow Answer

Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output has to be given up in order to reduce the inflation rate from

Correct AnswerverifiedShow Answer

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Correct AnswerverifiedShow Answer

Country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's. In the long run as compared to country B, country A will have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

Correct Answer
verified
Eventually the economy moves back to the...
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