Question 1

Figure 22-4 
-Refer to figure 22-4. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

Accepted Answer

A)  A, B
B)  A, D
C)  C, B
D)  None of the above is correct.E) B) and C)
F) A) and B)

Question 2

In the long run, a decrease in the money supply growth rate

Accepted Answer

A)  increases inflation and shifts the short-run Phillips curve right.
B)  increases inflation and shifts the short-run Phillips curve left.
C)  decreases inflation and shifts the short-run Philips curve right.
D)  decreases inflation and shifts the short-run Phillips curve left.E) All of the above
F) C) and D)

Question 3

Figure 22-5
Use the graph below to answer the following questions. 
-Refer to Figure 22-5. Curve 1 is the

Accepted Answer

A)  long-run aggregate supply curve.
B)  short-run aggregate supply curve.
C)  long-run Phillips curve.
D)  short-run Phillips curve.E) A) and B)
F) A) and D)

Question 4

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

Accepted Answer

A) True 
 B)False

Question 5

Figure 22-6
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 22-6. Starting from C and 3, in the short run, an unexpected decrease in money supply growth moves the economy to

Accepted Answer

A)  A and 1.
B)  B and 2.
C)  back to C and 3.
D)  D and 4.E) A) and D)
F) A) and C)

Question 6

Figure 22-5
Use the graph below to answer the following questions. 
-Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Accepted Answer

A)  B.
B)  D.
C)  F.
D)  None of the above is consistent with an increase in the money supply growth rate.E) B) and D)
F) A) and B)

Question 7

Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

Accepted Answer

A)  The short-run Phillips curve would shift to the left.
B)  The short-run Phillips curve would shift to the right.
C)  The economy would move up and to the left along a given short-run Phillips curve.
D)  The economy would move down and to the right along a given short-run Phillips curve.E) B) and C)
F) B) and D)

Question 8

Just as the aggregate-demand curve slopes downward only in the short run, the trade-off between inflation and unemployment holds only in the long run.

Accepted Answer

A) True 
 B)False

Question 9

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 D)

Question 10

In the long run, policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level.
B)  neither unemployment nor the price level.
C)  only unemployment.
D)  only the price level.E) All of the above
F) A) and C)

Question 11

The position of the long-run Phillips curve depends on

Accepted Answer

A)  the inflation rate and the natural rate of unemployment.
B)  the inflation rate but not the natural rate of unemployment.
C)  the natural rate of unemployment, but not the inflation rate.
D)  neither the natural rate of unemployment nor the inflation rate.E) B) and C)
F) All of the above

Question 12

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 13

In 1979, Fed chair Paul Volcker decided to pursue a policy

Accepted Answer

A)  that would lead to disinflation.
B)  that would create falling prices.
C)  to accommodate continuing adverse supply shocks.
D)  that maintained money growth at its current level.E) A) and B)
F) B) and D)

Question 14

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

Accepted Answer

A)  the short-run Phillips curve shifts right.
B)  the short-run Phillips curve shifts left.
C)  the long-run Phillips curve shifts right.
D)  the long-run Phillips curve shifts left.E) All of the above
F) None of the above

Question 15

Figure 22-2
Use the pair of diagrams below to answer the following questions. 
-Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to

Accepted Answer

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

Question 16

A favorable supply shock causes the price level to

Accepted Answer

A)  rise. To counter this a central bank would increase the money supply.
B)  rise. To counter this a central bank would decrease the money supply.
C)  fall. To counter this a central bank would increase the money supply.
D)  fall. To counter this a central bank would decrease the money supply.E) None of the above
F) A) and C)

Question 17

In the equation, Unemployment rate = Natural rate of unemployment - a * ctual 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) A) and D)
F) B) and D)

Question 18

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 19

The short-run Phillips curve is based on the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 20

If the central bank increases the money supply, then 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 B)
F) A) and C)

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

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

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Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to

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Just as the aggregate-demand curve slopes downward only in the short run, the trade-off between inflation and unemployment holds only in the long run.

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

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

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

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Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6. Starting from C and 3, in the short run, an unexpected decrease in money supply growth moves the economy to

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In the long run, a decrease in the money supply growth rate

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Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

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Figure 22-4 -Refer to figure 22-4. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

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The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

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Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

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The position of the long-run Phillips curve depends on

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The short-run Phillips curve is based on the classical dichotomy.

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In the long run, policy that changes aggregate demand changes

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A favorable supply shock causes the price level to

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Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

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Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5. Curve 1 is the

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

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In 1979, Fed chair Paul Volcker decided to pursue a policy

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