Question 1

The misery index is supposed to measure the

Accepted Answer

A)   social cost of unemployment.
B)   health of the economy.
C)   lost output associated with a particular unemployment rate.
D)   short-run tradeoff between inflation and unemployment.E) A) and C)
F) A) and D)

Question 2

If there is a decline in business confidence and the Fed desires to return unemployment towards its natural rate, what should it do? If business confidence eventually returns to normal but the Fed does not reverse its policy, what eventually happens to the inflation rate?

Accepted Answer

Increase the money s...

Question 3

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

Accepted Answer

If expected inflation decrease...

Question 4

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A)   right, so that at any unemployment rate inflation is higher in the short run than before.
B)   left, so that at any unemployment rate inflation is higher in the short run the before.
C)   right, so that at any unemployment rate inflation is lower in the short run than before.
D)   left, so that at any unemployment rate inflation is lower in the short run than before.E) None of the above
F) B) and D)

Question 5

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Accepted Answer

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

Question 6

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) None of the above
F) All of the above

Question 7

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Accepted Answer

A)   higher unemployment and lower output.
B)   higher unemployment and higher output.
C)   lower unemployment and lower output.
D)   lower unemployment and higher output.E) C) and D)
F) A) and B)

Question 8

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Accepted Answer

A) True 
 B)False

Question 9

Figure 35-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Accepted Answer

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

Question 10

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 11

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) C) and D)
F) All of the above

Question 12

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

Question 13

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. What is measured along the vertical axis of the right-hand graph?

Accepted Answer

A)   the interest rate
B)   the inflation rate
C)   the government's budget deficit as a percent of GDP
D)   the growth rate of the nominal money supplyE) B) and C)
F) A) and C)

Question 14

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

Accepted Answer

The short-run Phillips curve s...

Question 15

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Accepted Answer

Inflation rises and unemployment falls. ...

Question 16

If expected inflation increases, which of the following shifts right?

Accepted Answer

A)   both the short-run and the long-run Phillips curves
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 long-run nor the short-run Phillips curveE) A) and B)
F) A) and C)

Question 17

In the 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

Accepted Answer

A)   the recession that followed smaller and so provided a more favorable tradeoff between inflation and unemployment.
B)   the recession that followed smaller, but in doing so produced a less favorable tradeoff between inflation and unemployment.
C)   the recession that followed larger, but in doing so provided a more favorable tradeoff between inflation and unemployment.
D)   the recession that followed larger and also produced a less favorable tradeoff between inflation and unemployment.E) A) and B)
F) A) and C)

Question 18

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.E) A) and B)
F) A) and C)

Question 19

Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."  
-Refer to Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2

Accepted Answer

A)   results in a more favorable trade-off between inflation and unemployment.
B)   results in a more favorable trade-off between inflation and the growth rate of real GDP.
C)   represents an adverse shock to aggregate supply.
D)   represents a favorable shock to aggregate supply.E) C) and D)
F) None of the above

Question 20

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Accepted Answer

A)   Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation) .
B)   Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation) .
C)   Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation) .
D)   Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment) .E) C) and D)
F) B) and C)

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

The misery index is supposed to measure the

Correct Answer
verified

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

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

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

Correct Answer
verified

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

Correct Answer
verified
If expected inflation decrease...
View Answer

There is a

Correct Answer
verified

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Correct Answer
verified

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

Correct Answer
verified
The short-run Phillips curve s...
View Answer

Correct Answer
verified

In the 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

Correct Answer
verified

If there is a decline in business confidence and the Fed desires to return unemployment towards its natural rate, what should it do? If business confidence eventually returns to normal but the Fed does not reverse its policy, what eventually happens to the inflation rate?

Correct Answer
verified
Increase the money s...
View Answer

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct Answer
verified
Inflation rises and unemployment falls. ...
View Answer

If inflation expectations rise, the short-run Phillips curve shifts

Correct Answer
verified

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Correct Answer
verified

If expected inflation increases, which of the following shifts right?

Correct Answer
verified

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Correct Answer
verified

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Correct Answer
verified

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Correct Answer
verified

Correct Answer
verified

Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2

Correct Answer
verified

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

The misery index is supposed to measure the

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

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

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

Correct AnswerverifiedShow Answer

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

Correct AnswerverifiedIf expected inflation decrease...View AnswerShow Answer

There is a

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Correct AnswerverifiedShow Answer

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

Correct AnswerverifiedThe short-run Phillips curve s...View AnswerShow Answer

Correct AnswerverifiedShow Answer

In the 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

Correct AnswerverifiedShow Answer

If there is a decline in business confidence and the Fed desires to return unemployment towards its natural rate, what should it do? If business confidence eventually returns to normal but the Fed does not reverse its policy, what eventually happens to the inflation rate?

Correct AnswerverifiedIncrease the money s...View AnswerShow Answer

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct AnswerverifiedInflation rises and unemployment falls. ...View AnswerShow Answer

If inflation expectations rise, the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Correct AnswerverifiedShow Answer

If expected inflation increases, which of the following shifts right?

Correct AnswerverifiedShow Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Correct AnswerverifiedShow Answer

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2

Correct AnswerverifiedShow Answer

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If expected inflation decrease...
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The short-run Phillips curve s...
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Increase the money s...
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Inflation rises and unemployment falls. ...
View Answer

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