Question 1

What is meant by accommodation?

Accepted Answer

A central bank is said to acco

Question 2

If the minimum wage increased, then at any given rate of inflation

Accepted Answer

A) both output and employment would be higher. 
B) neither output nor employment would be higher. 
C) output would be higher and unemployment would be lower. 
D) output would be lower and unemployment would be higher. 
A) both output and employment would be higher. 
B) neither output nor employment would be higher. 
C) output would be higher and unemployment would be lower. 
D) output would be lower and unemployment would be higher.

Question 3

If inflation is greater than expected, then the unemployment rate is

Accepted Answer

A) above the natural rate. In the long run the short-run Phillips curve will shift right. 
B) above the natural rate. In the long run the short-run Phillips curve will shift left. 
C) below the natural rate. In the long run the short-run Phillips curve will shift right. 
D) below the natural rate. In the long run the short-run Phillips curve will shift left. 
A) above the natural rate. In the long run the short-run Phillips curve will shift right. 
B) above the natural rate. In the long run the short-run Phillips curve will shift left. 
C) below the natural rate. In the long run the short-run Phillips curve will shift right. 
D) below the natural rate. In the long run the short-run Phillips curve will shift left.

Question 4

Suppose that the money supply increases. In the short run this decreases unemployment according to

Accepted Answer

A) both the short-run Phillips curve and the aggregate demand and aggregate supply model. 
B) neither the short-run Phillips curve nor the aggregate demand and aggregate supply model. 
C) the short-run Phillips curve, but not according to the aggregate demand and supply model. 
D) the aggregate demand and aggregate supply model, but not according to the short-run Phillips curve. 
A) both the short-run Phillips curve and the aggregate demand and aggregate supply model. 
B) neither the short-run Phillips curve nor the aggregate demand and aggregate supply model. 
C) the short-run Phillips curve, but not according to the aggregate demand and supply model. 
D) the aggregate demand and aggregate supply model, but not according to the short-run Phillips curve.

Question 5

A change in expected inflation shifts

Accepted Answer

A) the short-run Phillips curve, but not the long run Phillips curve. 
B) the long-run Phillips curve, but not the long run Phillips curve. 
C) neither the short-run nor the long-run Phillips curve. 
D) both the short-run and long-run Phillips curve right. 
A) the short-run Phillips curve, but not the long run Phillips curve. 
B) the long-run Phillips curve, but not the long run Phillips curve. 
C) neither the short-run nor the long-run Phillips curve. 
D) both the short-run and long-run Phillips curve right.

Question 6

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

Accepted Answer

A) True 
 B)False

Question 7

The natural rate of unemployment

Accepted Answer

A) is constant over time. 
B) varies over time, but can't be changed by the government. 
C) is the unemployment rate that the economy tends to move to in the long run. 
D) depends on the rate at which the Fed increases the money supply. 
A) is constant over time. 
B) varies over time, but can't be changed by the government. 
C) is the unemployment rate that the economy tends to move to in the long run. 
D) depends on the rate at which the Fed increases the money supply.

Question 8

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Accepted Answer

A) True 
 B)False

Question 9

A favorable supply shock

Accepted Answer

A) raises unemployment and the inflation rate. 
B) raises unemployment and reduces the inflation rate. 
C) reduces unemployment and raises the inflation rate. 
D) reduces unemployment and the inflation rate. 
A) raises unemployment and the inflation rate. 
B) raises unemployment and reduces the inflation rate. 
C) reduces unemployment and raises the inflation rate. 
D) reduces unemployment and the inflation rate.

Question 10

If the Fed wants to reverse the effects of a favorable supply shock on unemployment, it should

Accepted Answer

A) increase the money supply growth rate which raises the inflation rate. 
B) increase the money supply growth rate which reduces the inflation rate. 
C) decrease the money supply growth rate which raises the inflation rate. 
D) decrease the money supply growth rate which reduces the inflation rate. 
A) increase the money supply growth rate which raises the inflation rate. 
B) increase the money supply growth rate which reduces the inflation rate. 
C) decrease the money supply growth rate which raises the inflation rate. 
D) decrease the money supply growth rate which reduces the inflation rate.

Question 11

Between 1993 and 2001 the U.S. economy experienced

Accepted Answer

A) relatively low inflation and unemployment rates. 
B) relatively high inflation and unemployment rates. 
C) relatively low inflation rates and relatively high unemployment rates. 
D) relatively high inflation rates and relatively low unemployment rates. 
A) relatively low inflation and unemployment rates. 
B) relatively high inflation and unemployment rates. 
C) relatively low inflation rates and relatively high unemployment rates. 
D) relatively high inflation rates and relatively low unemployment rates.

Question 12

Suppose that a central bank reduces the money supply growth rate to disinflate. What does disinflation mean? If people do not alter their inflation expectations, what happens to output and unemployment?

Accepted Answer

Disinflation means a reduction

Question 13

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 14

In response to an adverse supply shock, suppose the Fed implements accommodating monetary policy. Which of the following occurs as a result of the accommodating monetary policy?

Accepted Answer

A) Aggregate demand shifts to the left, which increases inflation and increases unemployment in the short run. 
B) Aggregate demand shifts to the left, which decreases inflation and increases unemployment in the short run. 
C) Aggregate demand shifts to the right, which increases inflation and increases unemployment in the short run. 
D) Aggregate demand shifts to the right, which increases inflation and decreases unemployment in the short run. 
A) Aggregate demand shifts to the left, which increases inflation and increases unemployment in the short run. 
B) Aggregate demand shifts to the left, which decreases inflation and increases unemployment in the short run. 
C) Aggregate demand shifts to the right, which increases inflation and increases unemployment in the short run. 
D) Aggregate demand shifts to the right, which increases inflation and decreases unemployment in the short run.

Question 15

Consider two countries: Eastland and Westland. Eastland's long-run Phillips curve sits further to the right than does Westland's long-run Phillips curve. Eastland and Westland are identical in all other ways. In particular, they have the same money supply growth rates. In the long run, compared to Westland, which of the following will we observe in Eastland?

Accepted Answer

A) higher unemployment and higher inflation. 
B) higher unemployment and the same rate of inflation. 
C) lower unemployment and higher inflation. 
D) None of the above is correct. 
A) higher unemployment and higher inflation. 
B) higher unemployment and the same rate of inflation. 
C) lower unemployment and higher inflation. 
D) None of the above is correct.

Question 16

​According to the Phillips curve, policymakers can reduce both inflation and unemployment by increasing the money supply.

Accepted Answer

A) True 
 B)False

Question 17

Refer to Monetary Policy in Flosserland. Suppose Flosserland has had the same inflation rate for a long time. Which, if either, of the following ideas imply that the unemployment rate in Flosserland would be above the natural rate.

Accepted Answer

A) both the Classical dichotomy and the long-run Phillips curve 
B) the Classical dichotomy, but not the long run Phillips curve 
C) the long-run Phillips curve, but not the Classical dichotomy 
D) neither the long-run Phillips curve nor the Classical dichotomy 
A) both the Classical dichotomy and the long-run Phillips curve 
B) the Classical dichotomy, but not the long run Phillips curve 
C) the long-run Phillips curve, but not the Classical dichotomy 
D) neither the long-run Phillips curve nor the Classical dichotomy

Question 18

According to the short-run Phillips curve, inflation

Accepted Answer

A) and unemployment would fall if the policymakers decreased the money supply. 
B) would fall and unemployment would rise if policymakers decreased the money supply. 
C) and unemployment would fall if the policymakers increased the money supply. 
D) would fall and unemployment would rise if policymakers increased the money supply. 
A) and unemployment would fall if the policymakers decreased the money supply. 
B) would fall and unemployment would rise if policymakers decreased the money supply. 
C) and unemployment would fall if the policymakers increased the money supply. 
D) would fall and unemployment would rise if policymakers increased the money supply.

Question 19

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Accepted Answer

A steeper Phillips c

Question 20

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%. Then

Accepted Answer

A) unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation. 
B) unemployment falls, but it would have fallen more if people had been expecting 25% inflation. 
C) unemployment rises, but it would have risen more if people had been expecting 12.5% inflation. 
D) unemployment rises, but it would have risen more if people had been expecting 25% inflation. 
A) unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation. 
B) unemployment falls, but it would have fallen more if people had been expecting 25% inflation. 
C) unemployment rises, but it would have risen more if people had been expecting 12.5% inflation. 
D) unemployment rises, but it would have risen more if people had been expecting 25% inflation.

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

What is meant by accommodation?

If the minimum wage increased, then at any given rate of inflation

If inflation is greater than expected, then the unemployment rate is

Suppose that the money supply increases. In the short run this decreases unemployment according to

A change in expected inflation shifts

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

The natural rate of unemployment

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

A favorable supply shock

If the Fed wants to reverse the effects of a favorable supply shock on unemployment, it should

Between 1993 and 2001 the U.S. economy experienced

Suppose that a central bank reduces the money supply growth rate to disinflate. What does disinflation mean? If people do not alter their inflation expectations, what happens to output and unemployment?

An increase in the inflation rate permanently reduces the natural rate of unemployment.

In response to an adverse supply shock, suppose the Fed implements accommodating monetary policy. Which of the following occurs as a result of the accommodating monetary policy?

​According to the Phillips curve, policymakers can reduce both inflation and unemployment by increasing the money supply.

Refer to Monetary Policy in Flosserland. Suppose Flosserland has had the same inflation rate for a long time. Which, if either, of the following ideas imply that the unemployment rate in Flosserland would be above the natural rate.

According to the short-run Phillips curve, inflation

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

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

Filters

According to the Phillips curve, policymakers can reduce both inflation and unemployment by increasing the money supply.