Question 1

In a stagflation phase, a decrease in short-run aggregate supply will generate

Accepted Answer

A)  an increase in the inflation rate and in the unemployment rate. 
B)  an increase in the inflation rate and a decrease in the unemployment rate. 
C)  an increase in the inflation rate with no change in the unemployment rate. 
D)  a decrease in the inflation rate and an increase in the unemployment rate. 
A)  an increase in the inflation rate and in the unemployment rate. 
B)  an increase in the inflation rate and a decrease in the unemployment rate. 
C)  an increase in the inflation rate with no change in the unemployment rate. 
D)  a decrease in the inflation rate and an increase in the unemployment rate.

Question 2

Use the following to answer questions .
Exhibit: AD-AS and the Inflation-Unemployment Cycle  
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle) At point 4, if policymakers are concerned about economic performance, they will most likely respond by

Accepted Answer

A)  increasing government purchases and the money supply. 
B)  increasing taxes. 
C)  decreasing aggregate demand. 
D)  having the Fed sell bonds. 
A)  increasing government purchases and the money supply. 
B)  increasing taxes. 
C)  decreasing aggregate demand. 
D)  having the Fed sell bonds.

Question 3

Frictional unemployment exists because

Accepted Answer

A)  the quantity demanded of labor exceeds the quantity supplied at the equilibrium wage rate. 
B)  of fluctuations in economic activity. 
C)  technological changes make the skills of the workers incompatible with the skills used on the job. 
D)  it takes time for people seeking jobs and employers seeking workers to find each other. 
A)  the quantity demanded of labor exceeds the quantity supplied at the equilibrium wage rate. 
B)  of fluctuations in economic activity. 
C)  technological changes make the skills of the workers incompatible with the skills used on the job. 
D)  it takes time for people seeking jobs and employers seeking workers to find each other.

Question 4

Use the following to answer questions .
Exhibit: Inflation and Unemployment 2  
-(Exhibit: Inflation and Unemployment 2) Consider the following statement: "The nation's inflation rate rose to a record high last month, the government reported yesterday. The consumer price index jumped 0.3% in January. Coupled with the announcement earlier this month that unemployment had risen by 0.5 percentage points, the reports suggested that the first month of President Nixon's second term had gotten off to a rocky start." Which of the following movements represents the statement?

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 C to B 
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 C to B

Question 5

Suppose that an economy experiences an increase in the unemployment rate and a decline in
The inflation rate simultaneously. This situation would be consistent with a movement along a

Accepted Answer

A)  vertical Phillips curve. 
B)  horizontal Phillips curve. 
C)  positively sloped Phillips curve. 
D)  negatively sloped Phillips curve. 
A)  vertical Phillips curve. 
B)  horizontal Phillips curve. 
C)  positively sloped Phillips curve. 
D)  negatively sloped Phillips curve.

Question 6

Other things equal, a decrease in the money supply is expected to shift the AD curve to the left.

Accepted Answer

A) True 
 B)False

Question 7

A period characterized by declining inflation and unemployment is called a

Accepted Answer

A)  economic growth phase. 
B)  stagflation phase. 
C)  recovery phase. 
D)  Phillips phase. 
A)  economic growth phase. 
B)  stagflation phase. 
C)  recovery phase. 
D)  Phillips phase.

Question 8

A period marked by rising unemployment and high inflation is called a

Accepted Answer

A)  inflationary phase. 
B)  stagflation phase. 
C)  Phillips phase. 
D)  recovery phase. 
A)  inflationary phase. 
B)  stagflation phase. 
C)  Phillips phase. 
D)  recovery phase.

Question 9

Which of the following determines the rate of inflation in the long run?
I. the rate of money growth
II. changes in expectations about the price level
III. the rate of economic growth
IV. changes in government spending

Accepted Answer

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

Question 10

Use the following to answer questions .
Exhibit: AD-AS and the Inflation-Unemployment Cycle  
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from

Accepted Answer

A)  point 1 to point 2 is representative of a recovery phase. 
B)  point 3 to point 4 is representative of a stagflation phase. 
C)  point 3 to point 2 is representative of a recovery phase. 
D)  point 4 to point 3 is representative of a Phillips phase. 
A)  point 1 to point 2 is representative of a recovery phase. 
B)  point 3 to point 4 is representative of a stagflation phase. 
C)  point 3 to point 2 is representative of a recovery phase. 
D)  point 4 to point 3 is representative of a Phillips phase.

Question 11

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

Accepted Answer

The Phillips curve hypothesis suggests t

Question 12

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

Accepted Answer

A)  Phillips phase 
B)  Growth phase 
C)  Stagflation phase 
D)  Recovery phase 
A)  Phillips phase 
B)  Growth phase 
C)  Stagflation phase 
D)  Recovery phase

Question 13

Suppose an economy is operating with a recessionary gap. In this case, policymakers would seek to move the economy

Accepted Answer

A)  back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
B)  up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
C)  back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
D)  up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
A)  back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
B)  up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
C)  back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
D)  up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.

Question 14

Use the following to answer questions .
Exhibit: Shifts in Aggregate Demand and Aggregate Supply and Inflation-Unemployment Phases  
-(Exhibit: Shifts in Aggregate Demand and Aggregate Supply and Inflation-Unemployment Phases) The movement from point 4 to point 5 is consistent with which
Segment in the diagram below?

Accepted Answer

A)  Segment A to D 
B)  Segment A to B 
C)  Segment B to C 
D)  Segment C to D 
A)  Segment A to D 
B)  Segment A to B 
C)  Segment B to C 
D)  Segment C to D

Question 15

Use the following to answer questions .
Exhibit: Inflation and Unemployment 1  
-(Exhibit: Inflation and Unemployment 1) Consider point B where unemployment is relatively high and inflation is relatively low. In order to move up the curve toward point A, 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 16

A Phillips phase emerges because wages are flexible and adjust more quickly than anticipated.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Accepted Answer

A)  If the money supply grows at a faster rate than growth in YP, there will be inflation. 
B)  If the money supply grows at a slower rate than growth in YP, there will be a decrease in the inflation rate. 
C)  If the money supply grows at the same rate as growth in YP, the price level will fall and there will be deflation. 
D)  If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP. 
A)  If the money supply grows at a faster rate than growth in YP, there will be inflation. 
B)  If the money supply grows at a slower rate than growth in YP, there will be a decrease in the inflation rate. 
C)  If the money supply grows at the same rate as growth in YP, the price level will fall and there will be deflation. 
D)  If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP.

Question 18

In the long run, the major cause of inflation is excessive government spending.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Accepted Answer

A) If %∆M > %∆ YP , then %∆P > %∆M. B) If %∆M > %∆ YP , then %∆P > %∆ YP. C) If %∆M = %∆ YP , then %∆P = 0. D) If %∆M = %∆ YP , then %∆P < 0. A) If %∆M > %∆ YP , then %∆P > %∆M. B) If %∆M > %∆ YP , then %∆P > %∆ YP. C) If %∆M = %∆ YP , then %∆P = 0. D) If %∆M = %∆ YP , then %∆P < 0.

Question 20

Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies

Accepted Answer

A)  have been focused on moving the economy to its potential output. 
B)  have clearly shown a reduced tolerance for inflation. 
C)  were concentrated on bringing the price of oil down. 
D)  have moved toward restraining growth in financial markets. 
A)  have been focused on moving the economy to its potential output. 
B)  have clearly shown a reduced tolerance for inflation. 
C)  were concentrated on bringing the price of oil down. 
D)  have moved toward restraining growth in financial markets.

In a stagflation phase, a decrease in short-run aggregate supply will generate

Use the following to answer questions . Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) At point 4, if policymakers are concerned about economic performance, they will most likely respond by

Frictional unemployment exists because

Suppose that an economy experiences an increase in the unemployment rate and a decline in The inflation rate simultaneously. This situation would be consistent with a movement along a

Other things equal, a decrease in the money supply is expected to shift the AD curve to the left.

A period characterized by declining inflation and unemployment is called a

A period marked by rising unemployment and high inflation is called a

Which of the following determines the rate of inflation in the long run? I. the rate of money growth II. changes in expectations about the price level III. the rate of economic growth IV. changes in government spending

Use the following to answer questions . Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from

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

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

Suppose an economy is operating with a recessionary gap. In this case, policymakers would seek to move the economy

A Phillips phase emerges because wages are flexible and adjust more quickly than anticipated.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

In the long run, the major cause of inflation is excessive government spending.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters

Exam 16: Inflation and Unemployment

In a stagflation phase, a decrease in short-run aggregate supply will generate

Use the following to answer questions . Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) At point 4, if policymakers are concerned about economic performance, they will most likely respond by

Frictional unemployment exists because

Suppose that an economy experiences an increase in the unemployment rate and a decline in The inflation rate simultaneously. This situation would be consistent with a movement along a

Other things equal, a decrease in the money supply is expected to shift the AD curve to the left.

A period characterized by declining inflation and unemployment is called a

A period marked by rising unemployment and high inflation is called a

Which of the following determines the rate of inflation in the long run? I. the rate of money growth II. changes in expectations about the price level III. the rate of economic growth IV. changes in government spending

Use the following to answer questions . Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from

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

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

Suppose an economy is operating with a recessionary gap. In this case, policymakers would seek to move the economy

A Phillips phase emerges because wages are flexible and adjust more quickly than anticipated.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

In the long run, the major cause of inflation is excessive government spending.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?