Question 1

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Accepted Answer

Consider what happens when the aggregate...

Question 2

If the natural rate of unemployment falls,

Accepted Answer

A)  both the short-run and long-run Phillips curves shift left.
B)  the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged.
C)  the short-run Phillips curve is unchanged, the long-run Phillips curve shifts right.
D)  the short-run and the long-run Phillips curves shift right.E) A) and B)
F) A) and C)

Question 3

Phillips found a negative relation between

Accepted Answer

A)  output and unemployment.
B)  output and employment.
C)  wage inflation and output.
D)  wage inflation and unemployment.E) B) and C)
F) A) and B)

Question 4

Suppose that the Prime Minister and Parliament of Veridian are disappointed with the high inflation rates under the current system where the Veridian Ministry of Finance is in charge of the money supply.They make reforms to lower inflation from its current rate of 10%.Suppose further that the public is confident that with the reforms in place that inflation will fall to 2%.Also suppose that those in control of the money supply actually conduct monetary policy so that the actual inflation rate is 4%.Using long-run and short-run Phillips curves and assuming the natural rate of unemployment is 6%,show the initial long run equilibrium of Veridian and label it "A".Assuming that the government had actually set inflation at 2% and that the public believed this,label the long-run equilibrium "B".Now,suppose that inflation expectations fell to 2% and that the government unexpectedly created inflation of 4%.Show the short-run equilibrium and label it "C".If the money supply continues to grow at a rate consistent with 4% inflation,show where the economy ends up and label that point "D".

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Veridian ...

Question 5

The large increase in oil prices in the 1970s was caused primarily by a(n)

Accepted Answer

A)  increase in demand for oil.
B)  decrease in demand for oil.
C)  decrease in the supply of oil.
D)  increase in the supply of oil.E) B) and C)
F) A) and D)

Question 6

The Volcker disinflation

Accepted Answer

A)  had virtually no impact on output just as the classical dichotomy suggested.
B)  was associated with rising output, perhaps due to expansionary fiscal policy.
C)  caused output to fall, but by less than the typical estimate of the sacrifice ratio suggested.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 7

Use the two graphs in the diagram to answer the following questions.
Figure 35-3
 
-Refer to Figure 35-3.Starting from c and 3,in the long run,a decrease in money supply growth moves the economy to

Accepted Answer

A)  a and 1.
B)  back to c and 3.
C)  d and 4.
D)  e and 5.E) B) and C)
F) A) and B)

Question 8

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

Question 9

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years,the sacrifice ratio every year is

Accepted Answer

A)  1.
B)  2.
C)  3.
D)  None of the above is correct.E) All of the above
F) A) and D)

Question 10

The misery index is calculated as the

Accepted Answer

A)  inflation rate plus the unemployment rate.
B)  unemployment rate minus the inflation rate.
C)  actual inflation rate minus the expected inflation rate.
D)  natural unemployment rate plus the long-run inflation rate.E) None of the above
F) A) and D)

Question 11

In 1980,the U.S.misery index was

Accepted Answer

A)  much higher than average.
B)  slightly higher than average.
C)  about average.
D)  below average.E) A) and D)
F) B) and D)

Question 12

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Accepted Answer

A)  It would shift the long-run Phillips curve right.
B)  It would shift the long-run Phillips curve left.
C)  There would be an upward movement along a given long-run Phillips curve.
D)  There would be a downward movement along a given long-run Philips curve.E) A) and B)
F) A) and C)

Question 13

Monetary policy of the early 1980s cut inflation by more than half.

Accepted Answer

A) True 
 B)False

Question 14

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A)  an increase in the natural rate of unemployment or expansionary monetary policy.
B)  expansionary monetary policy, but not an increase in the natural rate of unemployment.
C)  an increase in the natural rate of unemployment or a contractionary monetary policy.
D)  contractionary monetary policy, but not an increase in the natural rate of unemployment.E) B) and C)
F) A) and B)

Question 15

If the central bank increases the money supply,in the short run,prices

Accepted Answer

A)  rise and unemployment falls.
B)  fall and unemployment rises.
C)  and unemployment rise.
D)  and unemployment fall.E) A) and C)
F) All of the above

Question 16

Figure 35-4
 
-Refer to figure 35-4.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A)  7% unemployment and 1% inflation
B)  7% unemployment and 3% inflation
C)  3% unemployment and 5% inflation
D)  3% unemployment and 7% inflationE) A) and B)
F) B) and C)

Question 17

In the early 1970s,the short-run Phillips curve shifted

Accepted Answer

A)  right as inflation expectations rose.
B)  right as inflation expectations fell.
C)  left as inflation expectations rose.
D)  left as inflation expectations fell.E) A) and D)
F) C) and D)

Question 18

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 D)
F) None of the above

Question 19

Use the graph below to answer the following questions.
Figure 35-2
 
-Refer to Figure 35-2.Curve 2 is the

Accepted Answer

A)  long-run Phillips curve.
B)  short-run Phillips curve.
C)  long-run aggregate demand curve.
D)  short-run aggregate demand curve.E) None of the above
F) A) and D)

Question 20

Which of the following leads to a higher level of unemployment in the long run?

Accepted Answer

A)  both an increase in the size of the money supply and an increase in the money supply growth rate.
B)  an increase in the size of the money supply but not an increase in the money supply growth rate.
C)  an increase in the money supply growth rate, but not an increase in the size of the money supply.
D)  neither an increase in the size of the money supply nor an increase in the money supply growth rate.E) B) and C)
F) A) and D)

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

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years,the sacrifice ratio every year is

Correct Answer
verified

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Correct Answer
verified
Consider what happens when the aggregate...
View Answer

Monetary policy of the early 1980s cut inflation by more than half.

Correct Answer
verified

Samuelson and Solow believed that the Phillips curve

Correct Answer
verified

The misery index is calculated as the

Correct Answer
verified

In the early 1970s,the short-run Phillips curve shifted

Correct Answer
verified

If the natural rate of unemployment falls,

Correct Answer
verified

If the central bank increases the money supply,in the short run,prices

Correct Answer
verified

Correct Answer
verified
Veridian ...
View Answer

In 1980,the U.S.misery index was

Correct Answer
verified

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.Curve 2 is the

Correct Answer
verified

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct Answer
verified

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

Correct Answer
verified

The large increase in oil prices in the 1970s was caused primarily by a(n)

Correct Answer
verified

Phillips found a negative relation between

Correct Answer
verified

A movement to the right along a given short-run Phillips curve could be caused by

Correct Answer
verified

The Volcker disinflation

Correct Answer
verified

Which of the following leads to a higher level of unemployment in the long run?

Correct Answer
verified

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.Starting from c and 3,in the long run,a decrease in money supply growth moves the economy to

Correct Answer
verified

Figure 35-4 -Refer to figure 35-4.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Correct Answer
verified

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

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years,the sacrifice ratio every year is

Correct AnswerverifiedShow Answer

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Correct AnswerverifiedConsider what happens when the aggregate...View AnswerShow Answer

Monetary policy of the early 1980s cut inflation by more than half.

Correct AnswerverifiedShow Answer

Samuelson and Solow believed that the Phillips curve

Correct AnswerverifiedShow Answer

The misery index is calculated as the

Correct AnswerverifiedShow Answer

In the early 1970s,the short-run Phillips curve shifted

Correct AnswerverifiedShow Answer

If the natural rate of unemployment falls,

Correct AnswerverifiedShow Answer

If the central bank increases the money supply,in the short run,prices

Correct AnswerverifiedShow Answer

Correct Answerverified Veridian ...View AnswerShow Answer

In 1980,the U.S.misery index was

Correct AnswerverifiedShow Answer

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.Curve 2 is the

Correct AnswerverifiedShow Answer

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The large increase in oil prices in the 1970s was caused primarily by a(n)

Correct AnswerverifiedShow Answer

Phillips found a negative relation between

Correct AnswerverifiedShow Answer

A movement to the right along a given short-run Phillips curve could be caused by

Correct AnswerverifiedShow Answer

The Volcker disinflation

Correct AnswerverifiedShow Answer

Which of the following leads to a higher level of unemployment in the long run?

Correct AnswerverifiedShow Answer

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.Starting from c and 3,in the long run,a decrease in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

Figure 35-4 -Refer to figure 35-4.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Correct AnswerverifiedShow Answer

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Consider what happens when the aggregate...
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Veridian ...
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