Question 1

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Accepted Answer

A)  operating near full employment. 
B)  on the horizontal part of the aggregate supply curve. 
C)  operating with high unemployment. 
D)  operating with substantial excess capacity. 
A)  operating near full employment. 
B)  on the horizontal part of the aggregate supply curve. 
C)  operating with high unemployment. 
D)  operating with substantial excess capacity.

Question 2

A vocal minority of economists, believers in the theory of rational expectations, insist that

Accepted Answer

A)  the Phillips curve is downward sloping even in the short run. 
B)  the Phillips curve is vertical even in the short run. 
C)  a trade-off exists between inflation and unemployment even in the long run. 
D)  expansionary fiscal and monetary policy can reduce unemployment without creating inflation. 
A)  the Phillips curve is downward sloping even in the short run. 
B)  the Phillips curve is vertical even in the short run. 
C)  a trade-off exists between inflation and unemployment even in the long run. 
D)  expansionary fiscal and monetary policy can reduce unemployment without creating inflation.

Question 3

Figure 17-1
  
-Which of the following is true about the economy depicted in Figure 17-1?

Accepted Answer

A)  Tax incentives are being used to stimulate aggregate supply. 
B)  Policy makers believe the costs of unemployment are higher than the costs of inflation. 
C)  Contractionary monetary policy is being enacted to fight inflation. 
D)  Prices are rising but real GDP is falling. 
A)  Tax incentives are being used to stimulate aggregate supply. 
B)  Policy makers believe the costs of unemployment are higher than the costs of inflation. 
C)  Contractionary monetary policy is being enacted to fight inflation. 
D)  Prices are rising but real GDP is falling.

Question 4

At one time, policy makers interpreted the Phillips curve as offering a menu of inflation-unemployment choices.Today, the curve is no longer viewed this way.Why has the interpretation changed?

Accepted Answer

The original view stemmed from the effec

Question 5

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 6

If economic fluctuations originate on the supply side,

Accepted Answer

A)  there will be no relationship between unemployment and inflation. 
B)  real wage increases will be necessary to eliminate unemployment. 
C)  inflation and unemployment will be negatively related. 
D)  inflation and unemployment will be positively related. 
A)  there will be no relationship between unemployment and inflation. 
B)  real wage increases will be necessary to eliminate unemployment. 
C)  inflation and unemployment will be negatively related. 
D)  inflation and unemployment will be positively related.

Question 7

Most economists now agree that the Phillips curve demonstrates that there is

Accepted Answer

A)  an unemployment-inflation trade-off in the long run, but not in the short run. 
B)  an unemployment-inflation trade-off in both the short run and the long run. 
C)  an unemployment-inflation trade-off in the short run, but not the long run 
D)  no unemployment-inflation trade-off in either the short run or the long run. 
A)  an unemployment-inflation trade-off in the long run, but not in the short run. 
B)  an unemployment-inflation trade-off in both the short run and the long run. 
C)  an unemployment-inflation trade-off in the short run, but not the long run 
D)  no unemployment-inflation trade-off in either the short run or the long run.

Question 8

Figure 17-8
  
-In Figure 17-8, which of the following movements reflects the closing of an inflationary gap through the economy's automatic adjustment mechanism?

Accepted Answer

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

Question 9

A stimulus to aggregate demand will normally pull prices up but cause a reduction in output.

Accepted Answer

A) True 
 B)False

Question 10

If policy makers do nothing in a recessionary gap, the most likely outcome is a

Accepted Answer

A)  drop in the inflation rate and a rise in the unemployment rate. 
B)  drop in the inflation rate and a drop in the unemployment rate. 
C)  rise in the inflation rate and a drop in the unemployment rate. 
D)  rise in the inflation rate and a rise in the unemployment rate. 
A)  drop in the inflation rate and a rise in the unemployment rate. 
B)  drop in the inflation rate and a drop in the unemployment rate. 
C)  rise in the inflation rate and a drop in the unemployment rate. 
D)  rise in the inflation rate and a rise in the unemployment rate.

Question 11

The intent of indexing is to

Accepted Answer

A)  raise tax revenue automatically during inflation. 
B)  shift the short-run Phillips curve to the right. 
C)  take most of the sting out of inflation. 
D)  reduce inflation gradually. 
A)  raise tax revenue automatically during inflation. 
B)  shift the short-run Phillips curve to the right. 
C)  take most of the sting out of inflation. 
D)  reduce inflation gradually.

Question 12

If the aggregate supply curve shifts outward, then unemployment

Accepted Answer

A)  and inflation will both decrease. 
B)  and inflation will both increase. 
C)  will increase and inflation will decrease. 
D)  will decrease and inflation will increase. 
A)  and inflation will both decrease. 
B)  and inflation will both increase. 
C)  will increase and inflation will decrease. 
D)  will decrease and inflation will increase.

Question 13

If strong monetary policy stimulus is used to combat a recessionary gap, what will happen?

Accepted Answer

A)  a rapid movement toward lower unemployment and higher inflation 
B)  a rapid movement toward lower unemployment and lower inflation 
C)  a slow movement toward lower unemployment and higher inflation 
D)  a slow movement toward lower unemployment and lower inflation 
A)  a rapid movement toward lower unemployment and higher inflation 
B)  a rapid movement toward lower unemployment and lower inflation 
C)  a slow movement toward lower unemployment and higher inflation 
D)  a slow movement toward lower unemployment and lower inflation

Question 14

Some of the promising approaches to reducing the natural rate of unemployment have to do with education, training, and job placement.What implementation problems do you anticipate?

Accepted Answer

Training and placement programs sometime

Exam 34: The Trade-Off between Inflation and Unemployment

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

A vocal minority of economists, believers in the theory of rational expectations, insist that

Figure 17-1 -Which of the following is true about the economy depicted in Figure 17-1?

At one time, policy makers interpreted the Phillips curve as offering a menu of inflation-unemployment choices.Today, the curve is no longer viewed this way.Why has the interpretation changed?

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 economic fluctuations originate on the supply side,

Most economists now agree that the Phillips curve demonstrates that there is

Figure 17-8 -In Figure 17-8, which of the following movements reflects the closing of an inflationary gap through the economy's automatic adjustment mechanism?

A stimulus to aggregate demand will normally pull prices up but cause a reduction in output.

If policy makers do nothing in a recessionary gap, the most likely outcome is a

The intent of indexing is to

If the aggregate supply curve shifts outward, then unemployment

If strong monetary policy stimulus is used to combat a recessionary gap, what will happen?

Some of the promising approaches to reducing the natural rate of unemployment have to do with education, training, and job placement.What implementation problems do you anticipate?

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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