Question 1

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) None of the above
F) C) and D)

Question 2

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Accepted Answer

A)   have higher average inflation rates than the United States.
B)   have long­run Phillips curves to the right of the United States'.
C)   may have less generous unemployment compensation or lower minimum wages.
D)   All of the above are consistent with the evidence on unemployment rates.E) None of the above
F) A) and B)

Question 3

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Accepted Answer

A)   an increase in both the inflation rate and the unemployment rate.
B)   an increase in the inflation rate and a reduction in the unemployment rate.
C)   no change in either the inflation rate or the unemployment rate.
D)   an increase in the inflation rate and no change in the unemployment rate.E) B) and C)
F) B) and D)

Question 4

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Accepted Answer

A)   unemployment equals the natural rate and expected inflation equals actual inflation.
B)   unemployment is above the natural rate and expected inflation equals actual inflation.
C)   unemployment equals the natural rate and expected inflation is greater than actual inflation.
D)   None of the above is necessarily correct.E) A) and B)
F) C) and D)

Question 5

An increase in the natural rate of unemployment shifts the short-run Phillips curve to the . If the central bank sees the increase in the unemployment rate, but thinks the natural rate has remained the same and so wants to reduce unemployment, it would the money supply growth rate. If it maintains this money supply growth rate, eventually the short run Phillips curve will shift and unemployment will be .

Accepted Answer

right, increase, rig...

Question 6

If asset prices fall and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Accepted Answer

Inflation falls and unemployment rises. ...

Question 7

If people correctly anticipate that inflation will fall by 1%, then

Accepted Answer

A)   the short-run Phillips curve shifts right and unemployment is unchanged.
B)   the short-run Phillips curve shifts right and unemployment rises.
C)   the short-run Phillips curve shifts left and unemployment is unchanged.
D)   the short-run Phillips curve would shift left and unemployment falls.E) A) and B)
F) A) and D)

Question 8

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

Accepted Answer

A)   unemployment and prices rise.
B)   unemployment rises and prices fall.
C)   unemployment falls and prices rise.
D)   unemployment and prices fall.E) A) and B)
F) A) and C)

Question 9

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

Question 10

When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation

Accepted Answer

A)   increases and unemployment increases.
B)   increases and unemployment decreases.
C)   decreases and unemployment increases.
D)   decreases and unemployment decreases.E) A) and B)
F) All of the above

Question 11

In his famous article published in an economics journal in 1958, A.W. Phillips

Accepted Answer

A)   used data for the United States to show a negative relationship between the rate of change of the U.S. consumer price index and the U.S. unemployment rate.
B)   used data for the United States to show a negative relationship between the rate of change of wages in the U.S. and the U.S. unemployment rate.
C)   used data for the United Kingdom to show a negative relationship between the rate of change of the U.K. consumer price index and the U.K. unemployment rate.
D)   used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate.E) A) and B)
F) None of the above

Question 12

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Accepted Answer

The inflation rate r...

Question 13

If the short-run Phillips curve were stable, which of the following would be unusual?

Accepted Answer

A)   an increase in government spending and a fall in unemployment
B)   an increase in inflation and a decrease in output
C)   a decrease in the inflation rate and a rise in the unemployment rate
D)   a decrease in the money supply and a rise in the unemployment rate.E) None of the above
F) B) and C)

Question 14

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

A)   should not see an increase in the unemployment rate even in the short run.
B)   will having rising unemployment for a while, but then return to the natural rate of unemployment.
C)   will have a permanently higher unemployment rate.
D)   None of the above is suggested by the arguments of Friedman and Phelps.E) A) and C)
F) None of the above

Question 15

If the Fed wants to reverse the effects of a favorable supply shock on the inflation rate, it should

Accepted Answer

A)   increase the money supply growth rate which also moves unemployment closer to its natural rate.
B)   increase the money supply growth rate, but this moves unemployment further from its natural rate.
C)   decrease the money supply growth rate which also moves unemployment closer to its natural rate.
D)   decrease the money supply growth rate, but this moves unemployment further from its natural rate.E) All of the above
F) A) and B)

Question 16

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 B)
F) All of the above

Question 17

According to the Phillips curve, unemployment and inflation are positively related in

Accepted Answer

A)   the short run and in the long run.
B)   the short run, but not in the long run.
C)   the long run, but not in the short run.
D)   neither the long run nor the short run.E) A) and B)
F) A) and C)

Question 18

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Accepted Answer

Both the long-run and the shor...

Question 19

Suppose that money supply growth increases. In the long run, this increases employment according to

Accepted Answer

A)   both the long-run Phillips curve and the aggregate demand and aggregate supply model.
B)   neither the long-run Phillips curve nor the aggregate demand and aggregate supply model.
C)   the long-run Phillips curve, but not the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model, but not the long-run Phillips curveE) A) and B)
F) All of the above

Question 20

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Accepted Answer

A)   and the inflation rate rise.
B)   and the inflation rate fall.
C)   rises and the inflation rate falls.
D)   falls and the inflation rate rises.E) A) and B)
F) A) and C)

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

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Correct Answer
verified
Both the long-run and the shor...
View Answer

Samuelson and Solow believed that the Phillips curve

Correct Answer
verified

Correct Answer
verified
right, increase, rig...
View Answer

When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation

Correct Answer
verified

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

Correct Answer
verified

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct Answer
verified

According to the Phillips curve, unemployment and inflation are positively related in

Correct Answer
verified

If asset prices fall and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

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

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Correct Answer
verified

If the short-run Phillips curve were stable, which of the following would be unusual?

Correct Answer
verified

In his famous article published in an economics journal in 1958, A.W. Phillips

Correct Answer
verified

Suppose that money supply growth increases. In the long run, this increases employment according to

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

If the Fed wants to reverse the effects of a favorable supply shock on the inflation rate, it should

Correct Answer
verified

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Correct Answer
verified
The inflation rate r...
View Answer

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

Correct Answer
verified

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Correct Answer
verified

If people correctly anticipate that inflation will fall by 1%, then

Correct Answer
verified

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Correct Answer
verified

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Correct Answer
verified

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

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Correct AnswerverifiedBoth the long-run and the shor...View AnswerShow Answer

Samuelson and Solow believed that the Phillips curve

Correct AnswerverifiedShow Answer

Correct Answerverifiedright, increase, rig...View AnswerShow Answer

When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct AnswerverifiedShow Answer

According to the Phillips curve, unemployment and inflation are positively related in

Correct AnswerverifiedShow Answer

If asset prices fall and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

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

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Correct AnswerverifiedShow Answer

If the short-run Phillips curve were stable, which of the following would be unusual?

Correct AnswerverifiedShow Answer

In his famous article published in an economics journal in 1958, A.W. Phillips

Correct AnswerverifiedShow Answer

Suppose that money supply growth increases. In the long run, this increases employment according to

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

If the Fed wants to reverse the effects of a favorable supply shock on the inflation rate, it should

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Correct AnswerverifiedThe inflation rate r...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Correct AnswerverifiedShow Answer

If people correctly anticipate that inflation will fall by 1%, then

Correct AnswerverifiedShow Answer

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Correct AnswerverifiedShow Answer

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Correct AnswerverifiedShow Answer

Correct Answer
verified
Both the long-run and the shor...
View Answer

Correct Answer
verified

Correct Answer
verified
right, increase, rig...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The inflation rate r...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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