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 recovery phase of the inflation-unemployment relationship, a falling rate of inflation implies a falling price level.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions .
Exhibit: Aggregate Demand Shifts and Expectations  
-(Exhibit: Aggregate Demand Shifts and Expectations) Suppose the economy was operating at point e in period 1. Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3. What happens when workers and firms adjust their expectations in a higher price level and act on these expectations?

Accepted Answer

A)  The aggregate demand curve shifts to the left until it intersects the long-run aggregate supply (LRAS) curve. 
B)  The short-run aggregate supply (SRAS) curve shifts to the right. 
C)  The SRAS curve shifts to the left. 
D)  Both the LRAS and the SRAS curves shift to the right. 
A)  The aggregate demand curve shifts to the left until it intersects the long-run aggregate supply (LRAS) curve. 
B)  The short-run aggregate supply (SRAS) curve shifts to the right. 
C)  The SRAS curve shifts to the left. 
D)  Both the LRAS and the SRAS curves shift to the right.

Question 4

Which of the following characterizes the relationship between inflation and unemployment in the United States?
I. There have been periods in which a clear tradeoff between inflation and unemployment
Seemed to exist.
II. There have been periods in which inflation and unemployment rose together.
III. There have been periods in which inflation and unemployment fell together.

Accepted Answer

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

Question 5

The essential feature of a stagflation phase is

Accepted Answer

A)  a shift in the short run aggregate supply curve to the right. 
B)  changes in expectations about the price level. 
C)  falling unemployment and rising inflation. 
D)  a shift of the LRAS curve to the right. 
A)  a shift in the short run aggregate supply curve to the right. 
B)  changes in expectations about the price level. 
C)  falling unemployment and rising inflation. 
D)  a shift of the LRAS curve to the right.

Question 6

Using the equation of exchange, the rate of money growth can be expressed as

Accepted Answer

A)  %∆M * %∆V = (%∆P * %∆Y) ÷ %∆V 
B)  %∆M = (%∆P + %∆Y) ÷ %∆V 
C)  %∆M = %∆P + %∆Y - %∆V 
D)  M * V = P* Y 
A)  %∆M * %∆V = (%∆P * %∆Y) ÷ %∆V 
B)  %∆M = (%∆P + %∆Y) ÷ %∆V 
C)  %∆M = %∆P + %∆Y - %∆V 
D)  M * V = P* Y

Question 7

From 1992 through 2000, the United States experienced

Accepted Answer

A)  rising unemployment and rising inflation. 
B)  falling unemployment and an inflation rate that was about 2% or less. 
C)  falling unemployment and an inflation rate that increased moderately over the period. 
D)  rising unemployment and a decreasing inflation rate. 
A)  rising unemployment and rising inflation. 
B)  falling unemployment and an inflation rate that was about 2% or less. 
C)  falling unemployment and an inflation rate that increased moderately over the period. 
D)  rising unemployment and a decreasing inflation rate.

Question 8

Use the following to answer questions .
Exhibit: Aggregate Demand Shifts and Expectations  
-(Exhibit: Aggregate Demand Shifts and Expectations) Suppose the economy was operating at point e in period 1. Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3. What happens when workers and firms become aware of a rise in the general price to Pg?

Accepted Answer

A)  Workers will agree to take wage cuts and firms will agree to lower prices to ward off inflation. 
B)  They will revise their expectations of future prices to incorporate the higher price level. 
C)  Firms with sticky prices will ultimately adjust their prices downward. 
D)  Firms and workers will agree to renegotiate wage contracts downward. 
A)  Workers will agree to take wage cuts and firms will agree to lower prices to ward off inflation. 
B)  They will revise their expectations of future prices to incorporate the higher price level. 
C)  Firms with sticky prices will ultimately adjust their prices downward. 
D)  Firms and workers will agree to renegotiate wage contracts downward.

Question 9

If the efficiency wage theory holds,

Accepted Answer

A)  wage rigidity that perpetuates a recessionary gap is transformed from a temporary phenomenon to a permanent feature. 
B)  self-correction will automatically eliminate a recessionary gap. 
C)  increases in real wages will be required to eliminate a recessionary gap. 
D)  increases in nominal wages will be required to close a recessionary gap. 
A)  wage rigidity that perpetuates a recessionary gap is transformed from a temporary phenomenon to a permanent feature. 
B)  self-correction will automatically eliminate a recessionary gap. 
C)  increases in real wages will be required to eliminate a recessionary gap. 
D)  increases in nominal wages will be required to close a recessionary gap.

Question 10

Structural unemployment exists because

Accepted Answer

A)  workers may not be willing to accept jobs at the going 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)  workers may not be willing to accept jobs at the going 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 11

A Phillips curve implies

Accepted Answer

A)  a negative relationship between consumption and saving. 
B)  a positive relationship between inflation and prices. 
C)  a negative relationship between inflation and unemployment. 
D)  a positive relationship between consumption expenditure and inflation. 
A)  a negative relationship between consumption and saving. 
B)  a positive relationship between inflation and prices. 
C)  a negative relationship between inflation and unemployment. 
D)  a positive relationship between consumption expenditure and inflation.

Question 12

Which of the following statements is true of the U.S. experience with regards to the Phillips curve hypothesis?
I. Values of inflation and unemployment rates during the 1960s generally conformed to the tradeoff implied by the Phillips curve.
II. Annual observations of inflation and unemployment from 1961 to 2015 do not
Seem consistent with a Phillips curve.
III. Annual observations of inflation and unemployment from 1961 to 2015 seem consistent
With a Phillips curve.

Accepted Answer

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

Question 13

Falling inflation means

Accepted Answer

A)  that the price level is falling from one period to the next. 
B)  that the price level is falling at a decreasing rate. 
C)  that the price level is falling at an increasing rate. 
D)  that the price level is increasing at a decreasing rate. 
A)  that the price level is falling from one period to the next. 
B)  that the price level is falling at a decreasing rate. 
C)  that the price level is falling at an increasing rate. 
D)  that the price level is increasing at a decreasing rate.

Question 14

Use the following to answer questions .
Exhibit: AD-AS and the Inflation-Unemployment Cycle  
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle) If the economy is in equilibrium at point 3,

Accepted Answer

A)  it will most likely stay there for an indeterminate period. 
B)  the SRAS will most likely shift to the left because of firms and workers asking for higher prices and wages. 
C)  it will move to point 5 because of a shift in the aggregate supply curve from SRAS1 to SRAS2. 
D)  it will move to point 2 because the aggregate demand curve is likely to shift left in response to higher prices. 
A)  it will most likely stay there for an indeterminate period. 
B)  the SRAS will most likely shift to the left because of firms and workers asking for higher prices and wages. 
C)  it will move to point 5 because of a shift in the aggregate supply curve from SRAS1 to SRAS2. 
D)  it will move to point 2 because the aggregate demand curve is likely to shift left in response to higher prices.

Question 15

Suppose that rising productivity increases potential output in each period by 4%. Using the equation of exchange, what kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

Accepted Answer

A)  It should keep money supply constant. 
B)  It should increase money supply by 4% per period. 
C)  It should increase money supply by 4% in the first period and thereafter, hold money supply constant. 
D)  It should decrease money supply by 4% each period. 
A)  It should keep money supply constant. 
B)  It should increase money supply by 4% per period. 
C)  It should increase money supply by 4% in the first period and thereafter, hold money supply constant. 
D)  It should decrease money supply by 4% each period.

Question 16

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy
Was still in a recessionary gap left over from the 1990-1991 recession. Which of the
Following best explains this move?

Accepted Answer

A)  The Fed was concerned that the budget deficit would increase. 
B)  The Fed had failed to take into account the lag in monetary policy. 
C)  The Fed was taking explicit account of the lag in monetary policy. 
D)  The Fed wanted to avert a potential housing market crisis. 
A)  The Fed was concerned that the budget deficit would increase. 
B)  The Fed had failed to take into account the lag in monetary policy. 
C)  The Fed was taking explicit account of the lag in monetary policy. 
D)  The Fed wanted to avert a potential housing market crisis.

Question 17

In the short run, if the economy is in a Phillips phase of the inflation-unemployment relationship, an increase in aggregate demand will generate

Accepted Answer

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

Question 18

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

Question 19

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 20

In a recovery phase, a falling rate of inflation means that the price level is

Accepted Answer

A)  falling. 
B)  falling at an increasing rate. 
C)  rising by smaller and smaller percentages. 
D)  falling at a constant rate. 
A)  falling. 
B)  falling at an increasing rate. 
C)  rising by smaller and smaller percentages. 
D)  falling at a constant rate.

Rising inflation means

In the recovery phase of the inflation-unemployment relationship, a falling rate of inflation implies a falling price level.

The essential feature of a stagflation phase is

Using the equation of exchange, the rate of money growth can be expressed as

From 1992 through 2000, the United States experienced

If the efficiency wage theory holds,

Structural unemployment exists because

A Phillips curve implies

Falling inflation means

Use the following to answer questions . Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) If the economy is in equilibrium at point 3,

Suppose that rising productivity increases potential output in each period by 4%. Using the equation of exchange, what kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession. Which of the Following best explains this move?

In the short run, if the economy is in a Phillips phase of the inflation-unemployment relationship, an increase in aggregate demand will generate

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

During a Phillips phase,

In a recovery phase, a falling rate of inflation means that the price level is

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

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Exam 16: Inflation and Unemployment

Rising inflation means

In the recovery phase of the inflation-unemployment relationship, a falling rate of inflation implies a falling price level.

The essential feature of a stagflation phase is

Using the equation of exchange, the rate of money growth can be expressed as

From 1992 through 2000, the United States experienced

If the efficiency wage theory holds,

Structural unemployment exists because

A Phillips curve implies

Falling inflation means

Use the following to answer questions . Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) If the economy is in equilibrium at point 3,

Suppose that rising productivity increases potential output in each period by 4%. Using the equation of exchange, what kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession. Which of the Following best explains this move?

In the short run, if the economy is in a Phillips phase of the inflation-unemployment relationship, an increase in aggregate demand will generate

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

During a Phillips phase,

In a recovery phase, a falling rate of inflation means that the price level is

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