Question 1

The short-run Phillips curve is ________ than the long-run Phillips curve.

Accepted Answer

A)  flatter 
B)  steeper 
C)  less stable 
D)  Both B and C are correct. 
A)  flatter 
B)  steeper 
C)  less stable 
D)  Both B and C are correct.

Question 2

The short-run Phillips curve will not shift unless there is

Accepted Answer

A)  an increase in the unemployment rate. 
B)  an increase in inflation that is unanticipated. 
C)  a decrease in inflation that is unanticipated. 
D)  a change in inflation expectations. 
A)  an increase in the unemployment rate. 
B)  an increase in inflation that is unanticipated. 
C)  a decrease in inflation that is unanticipated. 
D)  a change in inflation expectations.

Question 3

Contractionary monetary policy will result in

Accepted Answer

A)  higher interest rates. 
B)  increased rates of inflation. 
C)  an upward shift in the short-run Phillips curve. 
D)  a leftward shift in the long-run Phillips curve. 
A)  higher interest rates. 
B)  increased rates of inflation. 
C)  an upward shift in the short-run Phillips curve. 
D)  a leftward shift in the long-run Phillips curve.

Question 4

An increase in expected inflation will

Accepted Answer

A)  increase real wages. 
B)  decrease the natural rate of unemployment. 
C)  shift the long-run Phillips curve to the right. 
D)  None of the above is correct. 
A)  increase real wages. 
B)  decrease the natural rate of unemployment. 
C)  shift the long-run Phillips curve to the right. 
D)  None of the above is correct.

Question 5

According to the short-run Phillips curve, which of the following would result in high rates of unemployment?

Accepted Answer

A)  strong increases in aggregate supply 
B)  a lower inflation rate 
C)  strong increases in aggregate demand 
D)  a higher inflation rate 
A)  strong increases in aggregate supply 
B)  a lower inflation rate 
C)  strong increases in aggregate demand 
D)  a higher inflation rate

Question 6

In the 1960s, many economists and policymakers believed the trade-off between inflation and unemployment was permanent.

Accepted Answer

A) True 
 B)False

Question 7

All other factors held constant, increased growth in aggregate demand will

Accepted Answer

A)  increase inflation. 
B)  reduce unemployment. 
C)  move the economy to a higher point on the short-run Phillips curve. 
D)  All of the above are correct. 
A)  increase inflation. 
B)  reduce unemployment. 
C)  move the economy to a higher point on the short-run Phillips curve. 
D)  All of the above are correct.

Question 8

Figure 28-6  
-Refer to Figure 28-6. If firms and workers have rational expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

Accepted Answer

A)  point B to point C. 
B)  point C to point A. 
C)  point A to point B. 
D)  point B to point A. 
E)  point A to point C. 
A)  point B to point C. 
B)  point C to point A. 
C)  point A to point B. 
D)  point B to point A. 
E)  point A to point C.

Question 9

What is the natural rate of unemployment?

Accepted Answer

A)  the unemployment rate that exists when the economy is at potential GDP 
B)  the unemployment rate that exists when the economy is at a trough in a business cycle 
C)  an unemployment rate of 0% 
D)  any unemployment rate that is above the inflation rate 
A)  the unemployment rate that exists when the economy is at potential GDP 
B)  the unemployment rate that exists when the economy is at a trough in a business cycle 
C)  an unemployment rate of 0% 
D)  any unemployment rate that is above the inflation rate

Question 10

In the long run, the Phillips curve is a ________ at ________.

Accepted Answer

A)  horizontal line; 0% inflation 
B)  negatively sloped line; the intersection of aggregate demand and short-run aggregate supply 
C)  vertical line; the natural rate of unemployment 
D)  vertical line; the expected rate of inflation 
A)  horizontal line; 0% inflation 
B)  negatively sloped line; the intersection of aggregate demand and short-run aggregate supply 
C)  vertical line; the natural rate of unemployment 
D)  vertical line; the expected rate of inflation

Question 11

If people assume that future rates of inflation will follow the pattern of inflation rates in the past, they are said to have

Accepted Answer

A)  rational expectations. 
B)  adaptive expectations. 
C)  unstable expectations. 
D)  accommodative expectations. 
A)  rational expectations. 
B)  adaptive expectations. 
C)  unstable expectations. 
D)  accommodative expectations.

Question 12

The policy which holds that the federal government should not allow large financial firms to fail, for fear of damaging the financial system, is known as the ________ policy.

Accepted Answer

A)  Dodd-Frank 
B)  mandatory bailout 
C)  too-big-to-fail 
D)  rational expectations 
A)  Dodd-Frank 
B)  mandatory bailout 
C)  too-big-to-fail 
D)  rational expectations

Question 13

If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve, the short-run Phillips curve will be

Accepted Answer

A)  negatively sloped. 
B)  positively sloped. 
C)  vertical. 
D)  flatter in the long run than it is in the short run. 
A)  negatively sloped. 
B)  positively sloped. 
C)  vertical. 
D)  flatter in the long run than it is in the short run.

Question 14

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers may have

Accepted Answer

A)  had adaptive expectations. 
B)  had rational expectations but didn't trust Fed announcements. 
C)  preferred high unemployment to high inflation. 
D)  Both A and B are correct answers. 
A)  had adaptive expectations. 
B)  had rational expectations but didn't trust Fed announcements. 
C)  preferred high unemployment to high inflation. 
D)  Both A and B are correct answers.

Question 15

If strong aggregate demand is pushing the economy beyond potential real GDP, which of the following must be true?

Accepted Answer

A)  The economy is at an equilibrium that is on the long-run aggregate supply curve. 
B)  The economy is at an equilibrium that is on the long-run Phillips curve. 
C)  The economy is at an equilibrium that is not on the long-run Phillips curve. 
D)  Expansionary monetary policies will push the economy back to the long-run Phillips curve. 
A)  The economy is at an equilibrium that is on the long-run aggregate supply curve. 
B)  The economy is at an equilibrium that is on the long-run Phillips curve. 
C)  The economy is at an equilibrium that is not on the long-run Phillips curve. 
D)  Expansionary monetary policies will push the economy back to the long-run Phillips curve.

Question 16

A decrease in cyclical unemployment will

Accepted Answer

A)  shift the long-run Phillips curve to the left. 
B)  decrease the natural rate of unemployment. 
C)  shift the short-run Phillips curve to the left. 
D)  All of the above are correct. 
E)  None of the above is correct. 
A)  shift the long-run Phillips curve to the left. 
B)  decrease the natural rate of unemployment. 
C)  shift the short-run Phillips curve to the left. 
D)  All of the above are correct. 
E)  None of the above is correct.

Question 17

Figure 28-2  
-Refer to Figure 28-2. At which point is the unemployment rate equal to the natural rate of unemployment?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  There is insufficient information on the graph to answer this question. 
A)  A 
B)  B 
C)  C 
D)  There is insufficient information on the graph to answer this question.

Exam 28: Inflation, Unemployment, and Federal Reserve Policy

The short-run Phillips curve is ________ than the long-run Phillips curve.

The short-run Phillips curve will not shift unless there is

Contractionary monetary policy will result in

An increase in expected inflation will

According to the short-run Phillips curve, which of the following would result in high rates of unemployment?

In the 1960s, many economists and policymakers believed the trade-off between inflation and unemployment was permanent.

All other factors held constant, increased growth in aggregate demand will

Figure 28-6 -Refer to Figure 28-6. If firms and workers have rational expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

What is the natural rate of unemployment?

In the long run, the Phillips curve is a ________ at ________.

If people assume that future rates of inflation will follow the pattern of inflation rates in the past, they are said to have

The policy which holds that the federal government should not allow large financial firms to fail, for fear of damaging the financial system, is known as the ________ policy.

If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve, the short-run Phillips curve will be

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers may have

If strong aggregate demand is pushing the economy beyond potential real GDP, which of the following must be true?

A decrease in cyclical unemployment will

Figure 28-2 -Refer to Figure 28-2. At which point is the unemployment rate equal to the natural rate of unemployment?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

In the long run, the Phillips curve is a at .