Question 1

A country is likely to have a higher sacrifice ratio if

Accepted Answer

A) contracts are shorter, and people believe the central bank will reduce inflation. 
B) contracts are longer, and people believe the central bank will not reduce inflation 
C) contracts are longer, and people believe the central bank will reduce inflation. 
D) contracts are shorter, and people believe the central bank will not reduce inflation. 
A) contracts are shorter, and people believe the central bank will reduce inflation. 
B) contracts are longer, and people believe the central bank will not reduce inflation 
C) contracts are longer, and people believe the central bank will reduce inflation. 
D) contracts are shorter, and people believe the central bank will not reduce inflation.

Question 2

What does the natural-rate hypothesis claim?

Accepted Answer

That eventually unem

Question 3

In the long run, a decrease in the money supply growth rate

Accepted Answer

A) shifts the short-run Phillips curve left so inflation returns to its original rate. 
B) shifts the short-run Phillips curve left so unemployment returns to its natural rate. 
C) Both A and B are correct. 
D) None of the above is correct. 
A) shifts the short-run Phillips curve left so inflation returns to its original rate. 
B) shifts the short-run Phillips curve left so unemployment returns to its natural rate. 
C) Both A and B are correct. 
D) None of the above is correct.

Question 4

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation. If in the process of bringing inflation down by 2 percentage points, real GDP falls by 6 percent for a year, the sacrifice ratio is

Accepted Answer

A) 5. 
B) 2. 
C) 12. 
D) None of the above is correct. 
A) 5. 
B) 2. 
C) 12. 
D) None of the above is correct.

Question 5

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A) right, so that at any unemployment rate inflation is higher in the short run than before. 
B) left, so that at any unemployment rate inflation is higher in the short run the before. 
C) right, so that at any unemployment rate inflation is lower in the short run than before. 
D) left, so that at any unemployment rate inflation is lower in the short run than before. 
A) right, so that at any unemployment rate inflation is higher in the short run than before. 
B) left, so that at any unemployment rate inflation is higher in the short run the before. 
C) right, so that at any unemployment rate inflation is lower in the short run than before. 
D) left, so that at any unemployment rate inflation is lower in the short run than before.

Question 6

In 1980, the combination of inflation and unemployment the U.S. was experiencing

Accepted Answer

A) resulted from a leftward shift of the short-run Phillips curve. 
B) was consistent with feasible inflation-unemployment combinations provided by the Phillips curve of the 1960s. 
C) followed two supply shocks that were triggered by the Organization of Petroleum Exporting Countries. 
D) All of the above are correct. 
A) resulted from a leftward shift of the short-run Phillips curve. 
B) was consistent with feasible inflation-unemployment combinations provided by the Phillips curve of the 1960s. 
C) followed two supply shocks that were triggered by the Organization of Petroleum Exporting Countries. 
D) All of the above are correct.

Question 7

A favorable supply shock will cause inflation to

Accepted Answer

A) rise and shift the short-run Phillips curve right. 
B) rise and shift the short-run Phillips curve left. 
C) fall and shift the short-run Phillips curve right. 
D) fall and shift the short-run Phillips curve left. 
A) rise and shift the short-run Phillips curve right. 
B) rise and shift the short-run Phillips curve left. 
C) fall and shift the short-run Phillips curve right. 
D) fall and shift the short-run Phillips curve left.

Question 8

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Accepted Answer

A) unemployment rises. In the long run the short-run Phillips curve shifts left. 
B) unemployment rises. In the long run the short-run Phillips curve shifts right. 
C) unemployment falls. In the long run the short-run the Phillips curve shifts left. 
D) unemployment falls. In the long run the short-run the Phillips curve shifts right. 
A) unemployment rises. In the long run the short-run Phillips curve shifts left. 
B) unemployment rises. In the long run the short-run Phillips curve shifts right. 
C) unemployment falls. In the long run the short-run the Phillips curve shifts left. 
D) unemployment falls. In the long run the short-run the Phillips curve shifts right.

Question 9

Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.

Accepted Answer

According to the sticky-wage theory, nom

Question 10

Suppose that as a result of a stock market boom, consumers become less concerned about saving for retirement and increase their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

Accepted Answer

A) In the short run, unemployment will increase and inflation will fall. 
B) ​In the short run, unemployment will increase and inflation will rise. 
C) ​In the short run, unemployment will decrease and inflation will rise. 
D) ​In the short run, unemployment will decrease and inflation will fall. 
A) In the short run, unemployment will increase and inflation will fall. 
B) ​In the short run, unemployment will increase and inflation will rise. 
C) ​In the short run, unemployment will decrease and inflation will rise. 
D) ​In the short run, unemployment will decrease and inflation will fall.

Question 11

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Accepted Answer

A) reduced inflation and unemployment. 
B) raised inflation and unemployment. 
C) reduce inflation and raised unemployment. 
D) raised inflation and reduced unemployment. 
A) reduced inflation and unemployment. 
B) raised inflation and unemployment. 
C) reduce inflation and raised unemployment. 
D) raised inflation and reduced unemployment.

Question 12

According to the short-run Phillips curve, if the central bank increases the money supply, then

Accepted Answer

A) inflation and unemployment will both fall. 
B) inflation and unemployment will both rise. 
C) inflation will fall and unemployment will rise. 
D) inflation will rise and unemployment will fall. 
A) inflation and unemployment will both fall. 
B) inflation and unemployment will both rise. 
C) inflation will fall and unemployment will rise. 
D) inflation will rise and unemployment will fall.

Question 13

The experience of the Volcker disinflation of the early 1980s

Accepted Answer

A) generally increased estimates of the sacrifice ratio. 
B) generally decreased estimates of the sacrifice ratio. 
C) clearly refuted the predictions of the proponents of rational expectations. 
D) clearly refuted the predictions of the opponents of rational expectations. 
A) generally increased estimates of the sacrifice ratio. 
B) generally decreased estimates of the sacrifice ratio. 
C) clearly refuted the predictions of the proponents of rational expectations. 
D) clearly refuted the predictions of the opponents of rational expectations.

Question 14

Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?

Accepted Answer

A) the unemployment rate and the inflation rate 
B) the unemployment rate but not the inflation rate 
C) the inflation rate but not the unemployment rate 
D) neither the inflation rate nor the unemployment rate 
A) the unemployment rate and the inflation rate 
B) the unemployment rate but not the inflation rate 
C) the inflation rate but not the unemployment rate 
D) neither the inflation rate nor the unemployment rate

Question 15

According to classical macroeconomic theory, in the long run

Accepted Answer

A) monetary growth affects both real and nominal variables. 
B) the only real variable affected by monetary growth is the unemployment rate. 
C) a number of factors that affect unemployment are influenced by monetary growth. 
D) monetary growth affects nominal but not real variables. 
A) monetary growth affects both real and nominal variables. 
B) the only real variable affected by monetary growth is the unemployment rate. 
C) a number of factors that affect unemployment are influenced by monetary growth. 
D) monetary growth affects nominal but not real variables.

Question 16

A.W. Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Accepted Answer

A) could not be extended to other countries, despite many researchers' attempts to provide that extension. 
B) was quickly extended to other countries by researchers. 
C) was extended to only one other country - the United States. 
D) was harshly criticized by the American economists Paul Samuelson and Robert Solow on the grounds that Phillips's study was fundamentally flawed. 
A) could not be extended to other countries, despite many researchers' attempts to provide that extension. 
B) was quickly extended to other countries by researchers. 
C) was extended to only one other country - the United States. 
D) was harshly criticized by the American economists Paul Samuelson and Robert Solow on the grounds that Phillips's study was fundamentally flawed.

Question 17

Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.    
-Refer to Figure 35-3. Assume the figure depicts possible outcomes for the year 2018. In 2018, the economy is at point A on the left-hand graph, which corresponds to point A on the right-hand graph. The price level in the year 2017 was

Accepted Answer

A) 144. 
B) 150. 
C) 152. 
D) 156. 
A) 144. 
B) 150. 
C) 152. 
D) 156.

Question 18

Which of the following is an example of an adverse supply shock?

Accepted Answer

A) a decrease in the money supply 
B) a tax cut 
C) a worldwide drought 
D) decreased government spending 
A) a decrease in the money supply 
B) a tax cut 
C) a worldwide drought 
D) decreased government spending

Question 19

Which of the following is correct concerning the long-run Phillips curve?

Accepted Answer

A) Its position is determined primarily by monetary factors. 
B) If it shifts right, long-run aggregate supply shifts right. 
C) It cannot be changed by any government policy. 
D) Its position depends on the natural rate of unemployment. 
A) Its position is determined primarily by monetary factors. 
B) If it shifts right, long-run aggregate supply shifts right. 
C) It cannot be changed by any government policy. 
D) Its position depends on the natural rate of unemployment.

Question 20

Suppose the economy is in long-run equilibrium at an inflation rate of 1% Then inflation expectations rise to 2% and inflation rises to 3%. The increase in expected inflation shifts the short-run Phillips curve

Accepted Answer

A) right. Overall, unemployment moves above its natural rate. 
B) right. Overall, unemployment moves below its natural rate. 
C) left. Overall, unemployment moves above its natural rate. 
D) left. Overall, unemployment moves below its natural rate. 
A) right. Overall, unemployment moves above its natural rate. 
B) right. Overall, unemployment moves below its natural rate. 
C) left. Overall, unemployment moves above its natural rate. 
D) left. Overall, unemployment moves below its natural rate.

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

A country is likely to have a higher sacrifice ratio if

What does the natural-rate hypothesis claim?

In the long run, a decrease in the money supply growth rate

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation. If in the process of bringing inflation down by 2 percentage points, real GDP falls by 6 percent for a year, the sacrifice ratio is

If inflation expectations rise, the short-run Phillips curve shifts

In 1980, the combination of inflation and unemployment the U.S. was experiencing

A favorable supply shock will cause inflation to

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.

Suppose that as a result of a stock market boom, consumers become less concerned about saving for retirement and increase their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

According to the short-run Phillips curve, if the central bank increases the money supply, then

The experience of the Volcker disinflation of the early 1980s

Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?

According to classical macroeconomic theory, in the long run

A.W. Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Which of the following is an example of an adverse supply shock?

Which of the following is correct concerning the long-run Phillips curve?

Suppose the economy is in long-run equilibrium at an inflation rate of 1% Then inflation expectations rise to 2% and inflation rises to 3%. The increase in expected inflation shifts the short-run Phillips curve

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

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