Question 1

On the vertical axis, the Phillips curve depicts the

Accepted Answer

A)  the rate of unemployment. 
B)  rate of inflation. 
C)  rate of growth of nominal GDP. 
D)  rate of growth of real GDP. 
A)  the rate of unemployment. 
B)  rate of inflation. 
C)  rate of growth of nominal GDP. 
D)  rate of growth of real GDP.

Question 2

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

Accepted Answer

A)  It is reinforced, and made more applicable for policy. 
B)  It is destroyed, and no longer applies for policy. 
C)  It is unchanged, although the curve becomes less steep. 
D)  It is unchanged, although the curve shifts inward and to the left. 
A)  It is reinforced, and made more applicable for policy. 
B)  It is destroyed, and no longer applies for policy. 
C)  It is unchanged, although the curve becomes less steep. 
D)  It is unchanged, although the curve shifts inward and to the left.

Question 3

Figure 17-7
  
-In Figure 17-7, the case for expansionary monetary policy and fiscal policy is strongest at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 4

If actual inflation differs from expected inflation, what is the slope of the Phillips curve?

Accepted Answer

A)  It is horizontal in the short and long run. 
B)  It is upward sloping in the short run and vertical in the long run. 
C)  It is vertical in the short run and upward sloping in the long run. 
D)  It is downward sloping in the short run and vertical in the long run. 
A)  It is horizontal in the short and long run. 
B)  It is upward sloping in the short run and vertical in the long run. 
C)  It is vertical in the short run and upward sloping in the long run. 
D)  It is downward sloping in the short run and vertical in the long run.

Question 5

If AD and AS increase at exactly the same rate, the result will be

Accepted Answer

A)  demand-side inflation. 
B)  supply-side inflation. 
C)  falling prices. 
D)  stable prices. 
A)  demand-side inflation. 
B)  supply-side inflation. 
C)  falling prices. 
D)  stable prices.

Question 6

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

Accepted Answer

A)  Contango 
B)  Swap 
C)  Averaging 
D)  Indexing 
A)  Contango 
B)  Swap 
C)  Averaging 
D)  Indexing

Question 7

If business fluctuations are from demand-side forces,

Accepted Answer

A)  monetary and fiscal policy will move inversely. 
B)  interest rates and budget deficits will move inversely. 
C)  unemployment and inflation will move inversely. 
D)  unemployment and budget deficits will move inversely. 
A)  monetary and fiscal policy will move inversely. 
B)  interest rates and budget deficits will move inversely. 
C)  unemployment and inflation will move inversely. 
D)  unemployment and budget deficits will move inversely.

Question 8

If workers and firms forecast inflation accurately,

Accepted Answer

A)  the aggregate supply curve will be vertical. 
B)  the real wage will not decline as the price level rises. 
C)  workers will not lose from inflation, and firms will not gain. 
D)  All of the above are correct. 
A)  the aggregate supply curve will be vertical. 
B)  the real wage will not decline as the price level rises. 
C)  workers will not lose from inflation, and firms will not gain. 
D)  All of the above are correct.

Question 9

Figure 17-7
  
-In Figure 17-7, the case for restrictive monetary and fiscal policy is strongest at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 10

Politicians and economists who are generally conservative tend to believe that

Accepted Answer

A)  the self-correcting mechanism is slow and unpredictable. 
B)  the short-run Phillips curve is relatively steep. 
C)  the costs of unemployment are high. 
D)  expectations in reaction to policy measures are very slow to change. 
A)  the self-correcting mechanism is slow and unpredictable. 
B)  the short-run Phillips curve is relatively steep. 
C)  the costs of unemployment are high. 
D)  expectations in reaction to policy measures are very slow to change.

Question 11

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 12

If aggregate demand in the U.S.had grown more slowly than it actually did in 2010, the

Accepted Answer

A)  unemployment rate would have been even lower. 
B)  inflation rate would have been even lower. 
C)  unemployment rate would have been the same. 
D)  economy would have grown faster. 
A)  unemployment rate would have been even lower. 
B)  inflation rate would have been even lower. 
C)  unemployment rate would have been the same. 
D)  economy would have grown faster.

Question 13

A non-policy reason for the reduction in the natural rate of unemployment is the

Accepted Answer

A)  expansionary nature of monetary policy. 
B)  aging of the U.S.labor force. 
C)  decline in interest rates. 
D)  growing federal budget surplus. 
A)  expansionary nature of monetary policy. 
B)  aging of the U.S.labor force. 
C)  decline in interest rates. 
D)  growing federal budget surplus.

Question 14

The unemployment rate for the U.S.economy in 2010 averaged about

Accepted Answer

A)  10 percent. 
B)  8 percent. 
C)  4 percent. 
D)  2 percent. 
A)  10 percent. 
B)  8 percent. 
C)  4 percent. 
D)  2 percent.

Question 15

In 2008-2010, American policy makers decided to risk

Accepted Answer

A)  higher inflation for the sake of decreasing unemployment. 
B)  higher unemployment to hold down inflation. 
C)  increasing taxes for the sake of reducing the budget deficit. 
D)  reducing government spending for the sake of balancing the budget. 
A)  higher inflation for the sake of decreasing unemployment. 
B)  higher unemployment to hold down inflation. 
C)  increasing taxes for the sake of reducing the budget deficit. 
D)  reducing government spending for the sake of balancing the budget.

Question 16

If the short-run Phillips curve has a very steep slope, the

Accepted Answer

A)  structural deficit will grow during inflation. 
B)  structural deficit will fall during recession. 
C)  inflation costs of reducing unemployment are relatively low. 
D)  inflation costs of reducing unemployment are relatively high. 
A)  structural deficit will grow during inflation. 
B)  structural deficit will fall during recession. 
C)  inflation costs of reducing unemployment are relatively low. 
D)  inflation costs of reducing unemployment are relatively high.

Question 17

In the 1990s, the United States benefited from a series of favorable supply shocks.This caused a(n)

Accepted Answer

A)  increase in inflation and unemployment. 
B)  decrease in inflation and unemployment. 
C)  increase in inflation and a decrease in unemployment. 
D)  decrease in inflation and an increase in unemployment. 
A)  increase in inflation and unemployment. 
B)  decrease in inflation and unemployment. 
C)  increase in inflation and a decrease in unemployment. 
D)  decrease in inflation and an increase in unemployment.

Question 18

The rapid advance in computer technology is one of the reasons given for the shift of the

Accepted Answer

A)  aggregate demand curve outward. 
B)  aggregate supply curve inward. 
C)  aggregate supply curve outward. 
D)  total expenditures curve upward. 
A)  aggregate demand curve outward. 
B)  aggregate supply curve inward. 
C)  aggregate supply curve outward. 
D)  total expenditures curve upward.

Question 19

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the

Accepted Answer

A)  worst recession occurs when output expands most rapidly. 
B)  slowest inflation occurs when output expands most rapidly. 
C)  slowest economic growth occurs when output grows most rapidly. 
D)  most rapid inflation occurs when output expands most rapidly. 
A)  worst recession occurs when output expands most rapidly. 
B)  slowest inflation occurs when output expands most rapidly. 
C)  slowest economic growth occurs when output grows most rapidly. 
D)  most rapid inflation occurs when output expands most rapidly.

Question 20

Demand-side inflation is usually accompanied by increasing real GDP, while supply-side inflation is usually accompanied by falling real GDP.

Accepted Answer

A) True 
 B)False

Exam 34: The Trade-Off between Inflation and Unemployment

On the vertical axis, the Phillips curve depicts the

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

Figure 17-7 -In Figure 17-7, the case for expansionary monetary policy and fiscal policy is strongest at point

If actual inflation differs from expected inflation, what is the slope of the Phillips curve?

If AD and AS increase at exactly the same rate, the result will be

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

If business fluctuations are from demand-side forces,

If workers and firms forecast inflation accurately,

Figure 17-7 -In Figure 17-7, the case for restrictive monetary and fiscal policy is strongest at point

Politicians and economists who are generally conservative tend to believe that

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

If aggregate demand in the U.S.had grown more slowly than it actually did in 2010, the

A non-policy reason for the reduction in the natural rate of unemployment is the

The unemployment rate for the U.S.economy in 2010 averaged about

In 2008-2010, American policy makers decided to risk

If the short-run Phillips curve has a very steep slope, the

In the 1990s, the United States benefited from a series of favorable supply shocks.This caused a(n)

The rapid advance in computer technology is one of the reasons given for the shift of the

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the

Demand-side inflation is usually accompanied by increasing real GDP, while supply-side inflation is usually accompanied by falling real GDP.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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

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