Question 1

Rising inflation means

Accepted Answer

A)  that the price level is increasing by a given percentage rate. 
B)  that the prices of all goods and services increase from year to year. 
C)  that the price level is rising at an increasing rate. 
D)  that the price level is rising at a variable rate. 
A)  that the price level is increasing by a given percentage rate. 
B)  that the prices of all goods and services increase from year to year. 
C)  that the price level is rising at an increasing rate. 
D)  that the price level is rising at a variable rate.

Question 2

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap. As suggested by the Phillips curve hypothesis, policy makers instituted a combination of contractionary fiscal and monetary policies to eliminate the output gap. Which of the following occurred as a result?

Accepted Answer

A)  The policies moved the economy from the stagflation phase to the Phillips phase. 
B)  The policies successfully reduced inflation and increased unemployment. 
C)  The outcome suggested by the Phillips phase did not occur, instead unemployment rose with virtually no change in inflation. 
D)  The policies moved the economy from a recovery phase to a stagflation phase. 
A)  The policies moved the economy from the stagflation phase to the Phillips phase. 
B)  The policies successfully reduced inflation and increased unemployment. 
C)  The outcome suggested by the Phillips phase did not occur, instead unemployment rose with virtually no change in inflation. 
D)  The policies moved the economy from a recovery phase to a stagflation phase.

Question 3

The theory that holds that firms may try to increase productivity by paying a wage in excess of the market-clearing wage is called the

Accepted Answer

A)  efficiency-wage theory. 
B)  reservation wage theory. 
C)  excess wage theory. 
D)  wage-inflation theory. 
A)  efficiency-wage theory. 
B)  reservation wage theory. 
C)  excess wage theory. 
D)  wage-inflation theory.

Question 4

The short-run Phillips curve implies a positive relationship between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 5

Figure 16-1  
-Refer to Figure 16-1. Consider point A where inflation is relatively high and unemployment is relatively low. In order to move down the curve toward point B, what fiscal policy measures should the policymakers undertake?

Accepted Answer

A)  Decrease taxes and government spending 
B)  Increase taxes and government spending 
C)  Increase taxes and decrease government spending 
D)  Decrease taxes and increase government spending 
A)  Decrease taxes and government spending 
B)  Increase taxes and government spending 
C)  Increase taxes and decrease government spending 
D)  Decrease taxes and increase government spending

Question 6

Which of the following affect the values of inflation and unemployment?
I. changes in government spending
II. expectations about the price level
III. changes in nominal wages
IV. changes in money supply

Accepted Answer

A)  I and IV only 
B)  I, II, and IV only 
C)  II and III only 
D)  I, II, III, and IV 
A)  I and IV only 
B)  I, II, and IV only 
C)  II and III only 
D)  I, II, III, and IV

Question 7

Which of the following economists came up with a theory regarding the tradeoff between Junemployment and inflation?

Accepted Answer

A)  Almarin Phillips 
B)  John Maynard Keynes 
C)  Joseph Schumpeter 
D)  Milton Friedman 
A)  Almarin Phillips 
B)  John Maynard Keynes 
C)  Joseph Schumpeter 
D)  Milton Friedman

Question 8

The Phillips phase of the inflation-unemployment relationship emerges because

Accepted Answer

A)  prices and wages are sticky. 
B)  nominal wages and prices fall. 
C)  the economy is stuck in an equilibrium below full employment. 
D)  people fully expect the price increases produced by increases in aggregate demand. 
A)  prices and wages are sticky. 
B)  nominal wages and prices fall. 
C)  the economy is stuck in an equilibrium below full employment. 
D)  people fully expect the price increases produced by increases in aggregate demand.

Question 9

Suppose an economy is operating with an inflationary gap. In this case, policymakers would Jseek to move the economy

Accepted Answer

A)  back down the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
B)  up the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
C)  back down the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
D)  up the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
A)  back down the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
B)  up the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
C)  back down the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
D)  up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

Question 10

Figure 16-2  
-Refer to Figure 16-2. Which of the following represents a stagflation phase?

Accepted Answer

A)  The movement from A to B 
B)  The movement from B to C 
C)  The movement from C to D 
D)  The movement from A to C 
A)  The movement from A to B 
B)  The movement from B to C 
C)  The movement from C to D 
D)  The movement from A to C

Question 11

During a Phillips phase,

Accepted Answer

A)  inflation and unemployment both increase. 
B)  inflation and unemployment stay the same. 
C)  inflation and unemployment both decrease. 
D)  unemployment decreases and inflation increases. 
A)  inflation and unemployment both increase. 
B)  inflation and unemployment stay the same. 
C)  inflation and unemployment both decrease. 
D)  unemployment decreases and inflation increases.

Question 12

Figure 16-8  
-Refer to Figure 16-8. The recessionary gap at point 4 was created

Accepted Answer

A)  during the Phillips phase that occurred when the economy moved from point 3 to point 4. 
B)  when policymakers pursued expansionary policies to move the economy from point 3 to point 4. 
C)  during the stagflation phase that occurred when the economy moved from point 3 to point 4. 
D)  during the recovery phase when economic agents revised their price expectations in higher prices. 
A)  during the Phillips phase that occurred when the economy moved from point 3 to point 4. 
B)  when policymakers pursued expansionary policies to move the economy from point 3 to point 4. 
C)  during the stagflation phase that occurred when the economy moved from point 3 to point 4. 
D)  during the recovery phase when economic agents revised their price expectations in higher prices.

Question 13

The Phillips curve hypothesis provides support for active stabilization policies. Explain in
Jwords and illustrate using a graph of aggregate-demand and aggregate supply.

Accepted Answer

The Phillips curve hypothesis suggests t

Question 14

Structural unemployment is best reduced by

Accepted Answer

A)  job training programs to retool workers with new skills. 
B)  improved job-market information. 
C)  an increasing unemployment compensation benefits. 
D)  offering above equilibrium wages to attract workers. 
A)  job training programs to retool workers with new skills. 
B)  improved job-market information. 
C)  an increasing unemployment compensation benefits. 
D)  offering above equilibrium wages to attract workers.

Question 15

A recovery phase is explained by

Accepted Answer

A)  rightward shifts of the short-run aggregate supply curve in response to expansionary policies. 
B)  rightward shifts of the aggregate demand curve in response to expansionary policies. 
C)  leftward shifts of the short-run aggregate supply curve in response to higher prices. 
D)  leftward shifts of the aggregate demand curve in response to higher prices. 
A)  rightward shifts of the short-run aggregate supply curve in response to expansionary policies. 
B)  rightward shifts of the aggregate demand curve in response to expansionary policies. 
C)  leftward shifts of the short-run aggregate supply curve in response to higher prices. 
D)  leftward shifts of the aggregate demand curve in response to higher prices.

Question 16

The Phillips phase of the inflation-unemployment relationship drives the price level

Accepted Answer

A)  below what workers and firms expected causing nominal wages to fall below their expected level. 
B)  below what workers and firms expected causing real wages to rise above their expected level. 
C)  above what workers and firms expected causing nominal wages to rise above their expected level. 
D)  above what workers and firms expected causing real wages to fall below their expected level. 
A)  below what workers and firms expected causing nominal wages to fall below their expected level. 
B)  below what workers and firms expected causing real wages to rise above their expected level. 
C)  above what workers and firms expected causing nominal wages to rise above their expected level. 
D)  above what workers and firms expected causing real wages to fall below their expected level.

Question 17

Sustained inflation over many years is most likely due to increases in the money supply in
Jexcess of increases in potential output.

Accepted Answer

A) True 
 B)False

Question 18

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course'. " Which of the following could have caused this phenomenon?

Accepted Answer

A)  Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. 
B)  Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right. 
C)  Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right. 
D)  Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right. 
A)  Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. 
B)  Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right. 
C)  Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right. 
D)  Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Rising inflation means

The theory that holds that firms may try to increase productivity by paying a wage in excess of the market-clearing wage is called the

The short-run Phillips curve implies a positive relationship between inflation and unemployment.

Figure 16-1 -Refer to Figure 16-1. Consider point A where inflation is relatively high and unemployment is relatively low. In order to move down the curve toward point B, what fiscal policy measures should the policymakers undertake?

Which of the following affect the values of inflation and unemployment? I. changes in government spending II. expectations about the price level III. changes in nominal wages IV. changes in money supply

Which of the following economists came up with a theory regarding the tradeoff between Junemployment and inflation?

The Phillips phase of the inflation-unemployment relationship emerges because

Suppose an economy is operating with an inflationary gap. In this case, policymakers would Jseek to move the economy

Figure 16-2 -Refer to Figure 16-2. Which of the following represents a stagflation phase?

During a Phillips phase,

Figure 16-8 -Refer to Figure 16-8. The recessionary gap at point 4 was created

The Phillips curve hypothesis provides support for active stabilization policies. Explain in Jwords and illustrate using a graph of aggregate-demand and aggregate supply.

Structural unemployment is best reduced by

A recovery phase is explained by

The Phillips phase of the inflation-unemployment relationship drives the price level

Sustained inflation over many years is most likely due to increases in the money supply in Jexcess of increases in potential output.

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course'. " Which of the following could have caused this phenomenon?

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

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Exam 16: Inflation and Unemployment

Rising inflation means

The theory that holds that firms may try to increase productivity by paying a wage in excess of the market-clearing wage is called the

The short-run Phillips curve implies a positive relationship between inflation and unemployment.

Figure 16-1 -Refer to Figure 16-1. Consider point A where inflation is relatively high and unemployment is relatively low. In order to move down the curve toward point B, what fiscal policy measures should the policymakers undertake?

Which of the following affect the values of inflation and unemployment? I. changes in government spending II. expectations about the price level III. changes in nominal wages IV. changes in money supply

Which of the following economists came up with a theory regarding the tradeoff between Junemployment and inflation?

The Phillips phase of the inflation-unemployment relationship emerges because

Suppose an economy is operating with an inflationary gap. In this case, policymakers would Jseek to move the economy

Figure 16-2 -Refer to Figure 16-2. Which of the following represents a stagflation phase?

During a Phillips phase,

Figure 16-8 -Refer to Figure 16-8. The recessionary gap at point 4 was created

The Phillips curve hypothesis provides support for active stabilization policies. Explain in Jwords and illustrate using a graph of aggregate-demand and aggregate supply.

Structural unemployment is best reduced by

A recovery phase is explained by

The Phillips phase of the inflation-unemployment relationship drives the price level

Sustained inflation over many years is most likely due to increases in the money supply in Jexcess of increases in potential output.

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course'. " Which of the following could have caused this phenomenon?

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters