Question 1

An example of indexing is a "cost of living" adjustment clause in a wage contract.

Accepted Answer

A) True 
 B)False

Question 2

Keynesian economists generally agree that unemployment is more costly than inflation.

Accepted Answer

A) True 
 B)False

Question 3

An inflationary gap will eliminate itself through a process of price increases.

Accepted Answer

A) True 
 B)False

Question 4

When the Phillips curve was first formulated (late 1960s),many economists thought that it showed a

Accepted Answer

A)  "menu" of budget deficits from different budget policies. 
B)  "menu" of possible choices available to policy makers. 
C)  guide to the appropriate mix of fiscal and monetary policy. 
D)  guide of political reactions to economic policy. 
A)  "menu" of budget deficits from different budget policies. 
B)  "menu" of possible choices available to policy makers. 
C)  guide to the appropriate mix of fiscal and monetary policy. 
D)  guide of political reactions to economic policy.

Question 5

Aggregate demand grows because

Accepted Answer

A)  patent laws protect and stimulate new inventions. 
B)  there is more machinery and technology improves. 
C)  the government increases its spending,a growing population increases consumer spending,and the Fed increases the money supply. 
D)  All of the above are correct. 
A)  patent laws protect and stimulate new inventions. 
B)  there is more machinery and technology improves. 
C)  the government increases its spending,a growing population increases consumer spending,and the Fed increases the money supply. 
D)  All of the above are correct.

Question 6

If workers demand wage compensation in advance of inflation,the economy's aggregate supply curve will

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be vertical. 
D)  be horizontal. 
A)  have a positive slope. 
B)  have a negative slope. 
C)  be vertical. 
D)  be horizontal.

Question 7

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

Accepted Answer

A)  generally accepted by politicians,although few economists accept this proposal. 
B)  largely accepted by most economists,although politicians do not agree. 
C)  highly debatable,because many do not agree that price stability should be the most important goal. 
D)  simply incorrect,and no one accepts this idea anymore. 
A)  generally accepted by politicians,although few economists accept this proposal. 
B)  largely accepted by most economists,although politicians do not agree. 
C)  highly debatable,because many do not agree that price stability should be the most important goal. 
D)  simply incorrect,and no one accepts this idea anymore.

Question 8

In the short run,fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

Accepted Answer

A)  the Fed and Congress rarely agree on policy. 
B)  one controls aggregate demand,the other controls aggregate supply. 
C)  both policies control only aggregate supply. 
D)  both policies control only aggregate demand. 
A)  the Fed and Congress rarely agree on policy. 
B)  one controls aggregate demand,the other controls aggregate supply. 
C)  both policies control only aggregate supply. 
D)  both policies control only aggregate demand.

Question 9

Most economists reject the theory of rational expectations because

Accepted Answer

A)  expectations adjust very quickly. 
B)  workers receive wage increases in advance of inflation. 
C)  the short-run aggregate supply curve is vertical. 
D)  labor contracts tend to embody past inflation rates. 
A)  expectations adjust very quickly. 
B)  workers receive wage increases in advance of inflation. 
C)  the short-run aggregate supply curve is vertical. 
D)  labor contracts tend to embody past inflation rates.

Question 10

The unemployment rate was increasing from 6 percent to 7 percent could be interpreted as an increase in the natural rate of

Accepted Answer

A)  inflation. 
B)  unemployment. 
C)  economic growth. 
D)  aggregate supply. 
A)  inflation. 
B)  unemployment. 
C)  economic growth. 
D)  aggregate supply.

Question 11

The Phillips curve is built on the assumption that business fluctuations are

Accepted Answer

A)  from the demand side. 
B)  from the supply side. 
C)  from both the demand and supply side. 
D)  purely random events. 
A)  from the demand side. 
B)  from the supply side. 
C)  from both the demand and supply side. 
D)  purely random events.

Question 12

Demand-side inflation differs from supply-side inflation in the following way:

Accepted Answer

A)  demand-side inflation has higher output; supply-side inflation has lower output. 
B)  demand-side inflation has lower output; supply-side inflation has higher output. 
C)  demand-side inflation is always followed by stagflation; supply-side inflation is always followed by demand-side inflation. 
D)  demand-side inflation has a self-correcting mechanism; supply-side inflation does not. 
A)  demand-side inflation has higher output; supply-side inflation has lower output. 
B)  demand-side inflation has lower output; supply-side inflation has higher output. 
C)  demand-side inflation is always followed by stagflation; supply-side inflation is always followed by demand-side inflation. 
D)  demand-side inflation has a self-correcting mechanism; supply-side inflation does not.

Question 13

The Phillips curve explains the trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 14

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well.How does economic theory explain this apparent violation of the Phillips curve model?

Accepted Answer

Just as the stagflation of the 1970s and

Question 15

Supply-side inflation will increase the price level and reduce real GDP.

Accepted Answer

A) True 
 B)False

Question 16

In 2010,dissenters were worried that the effects of policies to reduce unemployment would create

Accepted Answer

A)  the conditions for higher long-term inflation. 
B)  the conditions for a more horizontal Phillips curve. 
C)  conditions for higher long-term unemployment. 
D)  conditions for larger budget surpluses and,thus,higher interest rates. 
A)  the conditions for higher long-term inflation. 
B)  the conditions for a more horizontal Phillips curve. 
C)  conditions for higher long-term unemployment. 
D)  conditions for larger budget surpluses and,thus,higher interest rates.

Question 17

Figure 17-8  
-In Figure 17-8,which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?

Accepted Answer

A)  A to B to C 
B)  E to A to B 
C)  C to D to E 
D)  D to E to C 
A)  A to B to C 
B)  E to A to B 
C)  C to D to E 
D)  D to E to C

Question 18

If workers expect inflation,and tend to overestimate actual inflation when they negotiate wage increases,the result will be a continuing

Accepted Answer

A)  shift of AD to the left. 
B)  shift of AD to the right. 
C)  recessionary gap. 
D)  inflationary gap. 
A)  shift of AD to the left. 
B)  shift of AD to the right. 
C)  recessionary gap. 
D)  inflationary gap.

Question 19

Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?

Accepted Answer

Borrowers and lenders normally incorpora

Question 20

Favorable supply shocks should produce rapid economic growth with falling inflation.

Accepted Answer

A) True 
 B)False

An example of indexing is a "cost of living" adjustment clause in a wage contract.

Keynesian economists generally agree that unemployment is more costly than inflation.

An inflationary gap will eliminate itself through a process of price increases.

When the Phillips curve was first formulated (late 1960s),many economists thought that it showed a

Aggregate demand grows because

If workers demand wage compensation in advance of inflation,the economy's aggregate supply curve will

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

In the short run,fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

Most economists reject the theory of rational expectations because

The unemployment rate was increasing from 6 percent to 7 percent could be interpreted as an increase in the natural rate of

The Phillips curve is built on the assumption that business fluctuations are

Demand-side inflation differs from supply-side inflation in the following way:

The Phillips curve explains the trade-off between inflation and unemployment.

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well.How does economic theory explain this apparent violation of the Phillips curve model?

Supply-side inflation will increase the price level and reduce real GDP.

In 2010,dissenters were worried that the effects of policies to reduce unemployment would create

Figure 17-8 -In Figure 17-8,which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?

If workers expect inflation,and tend to overestimate actual inflation when they negotiate wage increases,the result will be a continuing

Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?

Favorable supply shocks should produce rapid economic growth with falling inflation.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 17: The Trade Off Between Inflation and Unemployment

An example of indexing is a "cost of living" adjustment clause in a wage contract.

Keynesian economists generally agree that unemployment is more costly than inflation.

An inflationary gap will eliminate itself through a process of price increases.

When the Phillips curve was first formulated (late 1960s),many economists thought that it showed a

Aggregate demand grows because

If workers demand wage compensation in advance of inflation,the economy's aggregate supply curve will

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

In the short run,fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

Most economists reject the theory of rational expectations because

The unemployment rate was increasing from 6 percent to 7 percent could be interpreted as an increase in the natural rate of

The Phillips curve is built on the assumption that business fluctuations are

Demand-side inflation differs from supply-side inflation in the following way:

The Phillips curve explains the trade-off between inflation and unemployment.

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well.How does economic theory explain this apparent violation of the Phillips curve model?

Supply-side inflation will increase the price level and reduce real GDP.

In 2010,dissenters were worried that the effects of policies to reduce unemployment would create

Figure 17-8 -In Figure 17-8,which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?

If workers expect inflation,and tend to overestimate actual inflation when they negotiate wage increases,the result will be a continuing

Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?

Favorable supply shocks should produce rapid economic growth with falling inflation.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters