Question 1

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Accepted Answer

A)  falls, so there are upward pressures on wages and prices.
B)  falls, so there are downward pressures on wages and prices.
C)  rises, so there are upward pressures on wages and prices.
D)  rises, so there are downward pressures on wages and prices.E) A) and B)
F) A) and C)

Question 2

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Accepted Answer

A) True 
 B)False

Question 3

If the sacrifice ratio is 3, reducing the inflation rate from 10 percent to 6 percent would require sacrificing

Accepted Answer

A)  2 percent of annual output.
B)  5 percent of annual output.
C)  6 percent of annual output.
D)  None of the above is correct.E) A) and D)
F) B) and C)

Question 4

Which of the following leads to a lower 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 rateE) All of the above
F) None of the above

Question 5

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

Accepted Answer

A)  increasing the money supply.
B)  increasing government expenditures.
C)  raising taxes.
D)  None of the above is correct.E) C) and D)
F) B) and C)

Question 6

Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Southland. Suppose Southland has had the same inflation rate for a long time. Which, if either, of the following ideas imply that the unemployment rate in Southland would be above the natural rate.

Accepted Answer

A)  both the Classical dichotomy and the long-run Phillips curve
B)  the Classical dichotomy, but not the long run Phillips curve
C)  the long-run Phillips curve, but not the Classical dichotomy
D)  neither the long-run Phillips curve nor the Classical dichotomyE) A) and B)
F) A) and C)

Question 7

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Accepted Answer

A)  Louise reads in the newspaper that the central bank recently raised the money supply.
B)  Eric gets fewer job offers
C)  Jack makes larger increases in the prices at his health food store.
D)  Maria's nominal wage increase is larger.E) A) and D)
F) A) and C)

Question 8

If the central bank decreases 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) All of the above
F) B) and D)

Question 9

Which of the following results in higher inflation and higher unemployment in the short run?

Accepted Answer

A)  a more expansionary monetary policy
B)  a more contractionary monetary policy
C)  a decrease in the minimum wage
D)  an adverse supply shock such as an increase in the price of oilE) A) and B)
F) B) and D)

Question 10

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 11

In most of the 1970s, the Fed's policy created expectations of high inflation.

Accepted Answer

A) True 
 B)False

Question 12

The idea that the long-run Phillips curve is

Accepted Answer

A)  vertical stems from the analysis of Samuelson and Solow.
B)  vertical stems from the analysis of Friedman and Phelps.
C)  vertical was disproved by the experiment that monetary and fiscal policymakers inadvertently created in the 1970s.
D)  downward-sloping can be correct if unemployment responds very quickly to unexpected inflation.E) None of the above
F) C) and D)

Question 13

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

Accepted Answer

A)  Expected inflation would exceed actual inflation, and unemployment would exceed its natural rate.
B)  Expected inflation would exceed actual inflation, and unemployment would be below its natural rate.
C)  Actual inflation would exceed expected inflation, and unemployment would exceed its natural rate.
D)  Actual inflation would exceed expected inflation, and unemployment would be below its natural rate.E) B) and C)
F) None of the above

Question 14

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same, then policymakers

Accepted Answer

A)  can not exploit a tradeoff between inflation and unemployment in either the short or long run.
B)  can exploit a tradeoff between inflation and unemployment in the short run but not in the long run.
C)  can exploit a tradeoff between inflation and unemployment in both the short run and the long run.
D)  can exploit a tradeoff between inflation and unemployment in the long run, but not the short run.E) A) and B)
F) All of the above

Question 15

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 16

Disinflation is a reduction in

Accepted Answer

A)  the price level.
B)  the inflation rate.
C)  the consumer price index.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 17

Which of the following shifts aggregate supply to the right?

Accepted Answer

A)  a decline in the price of imported natural resources
B)  a technological advance
C)  an older labor force that leaves jobs less frequently
D)  All of the above are correct.E) None of the above
F) C) and D)

Question 18

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie...

Question 19

Figure 22-3. 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 22-3. 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) All of the above
F) None of the above

Question 20

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Accepted Answer

Both reflect the classical dichotomy. Th...

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

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct Answer
verified
A downward-sloping Phillips curve implie...
View Answer

Which of the following shifts aggregate supply to the right?

Correct Answer
verified

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Correct Answer
verified

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

Correct Answer
verified

In most of the 1970s, the Fed's policy created expectations of high inflation.

Correct Answer
verified

Disinflation is a reduction in

Correct Answer
verified

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Correct Answer
verified

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Correct Answer
verified
Both reflect the classical dichotomy. Th...
View Answer

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

Correct Answer
verified

Correct Answer
verified

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

Correct Answer
verified

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Correct Answer
verified

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Correct Answer
verified

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same, then policymakers

Correct Answer
verified

Correct Answer
verified

Which of the following results in higher inflation and higher unemployment in the short run?

Correct Answer
verified

The idea that the long-run Phillips curve is

Correct Answer
verified

If the sacrifice ratio is 3, reducing the inflation rate from 10 percent to 6 percent would require sacrificing

Correct Answer
verified

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

Correct Answer
verified

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct Answer
verified

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

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct AnswerverifiedA downward-sloping Phillips curve implie...View AnswerShow Answer

Which of the following shifts aggregate supply to the right?

Correct AnswerverifiedShow Answer

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In most of the 1970s, the Fed's policy created expectations of high inflation.

Correct AnswerverifiedShow Answer

Disinflation is a reduction in

Correct AnswerverifiedShow Answer

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Correct AnswerverifiedShow Answer

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Correct AnswerverifiedBoth reflect the classical dichotomy. Th...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

Correct AnswerverifiedShow Answer

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Correct AnswerverifiedShow Answer

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same, then policymakers

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following results in higher inflation and higher unemployment in the short run?

Correct AnswerverifiedShow Answer

The idea that the long-run Phillips curve is

Correct AnswerverifiedShow Answer

If the sacrifice ratio is 3, reducing the inflation rate from 10 percent to 6 percent would require sacrificing

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct AnswerverifiedShow Answer

Correct Answer
verified
A downward-sloping Phillips curve implie...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Both reflect the classical dichotomy. Th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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