Question 1

Figure 33-6
​  
-The short-run Phillips curve in Figure 33-6 would include which of the following points?

Accepted Answer

A) g, e, m 
B) g, e, r 
C) j, e, r 
D) j, e, m 
A) g, e, m 
B) g, e, r 
C) j, e, r 
D) j, e, m

Question 2

Supply-side inflation is the rise in price level caused by slow growth (or decline) of aggregate supply.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following could trigger demand-side inflation?

Accepted Answer

A) A decrease in the money supply 
B) An increase in taxes 
C) An increase in government spending 
D) An increase in interest rates 
A) A decrease in the money supply 
B) An increase in taxes 
C) An increase in government spending 
D) An increase in interest rates

Question 4

Adverse shocks such as the crop failures of 1972-1973 and the oil price increases of 1974 and 1979 pushed the economy's

Accepted Answer

A) aggregate supply curve outward. 
B) Phillips curve inward toward the origin. 
C) aggregate supply curve inward. 
D) aggregate demand curve inward. 
A) aggregate supply curve outward. 
B) Phillips curve inward toward the origin. 
C) aggregate supply curve inward. 
D) aggregate demand curve inward.

Question 5

If an economy's resources are fully employed,

Accepted Answer

A) a great deal of unemployment will be needed to achieve even a small reduction in inflation. 
B) the aggregate supply curve (and thus the Phillips curve) will be flat. 
C) the aggregate supply curve (and thus the Phillips curve) will be steep. 
D) Both a and c are correct. 
A) a great deal of unemployment will be needed to achieve even a small reduction in inflation. 
B) the aggregate supply curve (and thus the Phillips curve) will be flat. 
C) the aggregate supply curve (and thus the Phillips curve) will be steep. 
D) Both a and c are correct.

Question 6

Figure 33-7
​  
-In Figure 33-7, 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 7

The unemployment rate for the U.S.economy in 2014 averaged about

Accepted Answer

A) 10.2 percent. 
B) 8.5 percent. 
C) 6.5 percent. 
D) 4 percent. 
A) 10.2 percent. 
B) 8.5 percent. 
C) 6.5 percent. 
D) 4 percent.

Question 8

If employees and employers always accurately predict inflation, what is the shape of the Phillips curve?

Accepted Answer

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

Question 9

Figure 33-8
​  
-In Figure 33-8, which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

Accepted Answer

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

Question 10

Which of the following is most likely to result in inflation?

Accepted Answer

A) Aggregate demand and aggregate supply grow at the same rate. 
B) Neither aggregate demand nor aggregate supply grows at all. 
C) Aggregate supply grows more rapidly than aggregate demand. 
D) Aggregate demand grows more rapidly than aggregate supply. 
A) Aggregate demand and aggregate supply grow at the same rate. 
B) Neither aggregate demand nor aggregate supply grows at all. 
C) Aggregate supply grows more rapidly than aggregate demand. 
D) Aggregate demand grows more rapidly than aggregate supply.

Question 11

The cost of reducing unemployment more rapidly by expansionary fiscal and monetary policies is a permanently higher inflation rate.

Accepted Answer

A) True 
 B)False

Question 12

Figure 33-4
​  
-Which panel in Figure 33-4 shows what happened in 2007-2009?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 13

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 14

In what way do policymakers have to face a trade-off between inflation and unemployment?

Accepted Answer

A) The cost of reducing inflation by restrictive fiscal and monetary policies is a temporary increase in unemployment. 
B) The cost of reducing inflation by restrictive fiscal and monetary policies is a permanent increase in unemployment. 
C) The cost of reducing unemployment by expansionary fiscal and monetary policies is virtually nonexistent. 
D) The cost of reducing unemployment by expansionary fiscal and monetary policies involves higher inflation during recessions. 
A) The cost of reducing inflation by restrictive fiscal and monetary policies is a temporary increase in unemployment. 
B) The cost of reducing inflation by restrictive fiscal and monetary policies is a permanent increase in unemployment. 
C) The cost of reducing unemployment by expansionary fiscal and monetary policies is virtually nonexistent. 
D) The cost of reducing unemployment by expansionary fiscal and monetary policies involves higher inflation during recessions.

Question 15

An example of indexing is a "cost of living" adjustment clause in a wage contract.

Accepted Answer

A) True 
 B)False

Question 16

If policymakers do nothing in response to an inflationary 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 higher 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 higher unemployment and higher inflation 
D) A slow movement toward lower unemployment and lower inflation

Question 17

If expectations are rational, forecasting errors are pure random numbers.

Accepted Answer

A) True 
 B)False

Question 18

If unemployment and inflation move inversely, then we can infer that business fluctuations are

Accepted Answer

A) from the demand side. 
B) from the supply side. 
C) from both the demand and supply side. 
D) purely random events. 
A) from the demand side. 
B) from the supply side. 
C) from both the demand and supply side. 
D) purely random events.

Question 19

A reduction in the rate of inflation is known as

Accepted Answer

A) disinflation. 
B) deflation. 
C) inflation. 
D) None of the above is correct. 
A) disinflation. 
B) deflation. 
C) inflation. 
D) None of the above is correct.

Question 20

Which of the following terms 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

Exam 33: The Trade-Off Between Inflation and Unemployment

Figure 33-6 ​ -The short-run Phillips curve in Figure 33-6 would include which of the following points?

Supply-side inflation is the rise in price level caused by slow growth (or decline) of aggregate supply.

Which of the following could trigger demand-side inflation?

Adverse shocks such as the crop failures of 1972-1973 and the oil price increases of 1974 and 1979 pushed the economy's

If an economy's resources are fully employed,

Figure 33-7 ​ -In Figure 33-7, the case for expansionary monetary policy and fiscal policy is strongest at point

The unemployment rate for the U.S.economy in 2014 averaged about

If employees and employers always accurately predict inflation, what is the shape of the Phillips curve?

Figure 33-8 ​ -In Figure 33-8, which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

Which of the following is most likely to result in inflation?

The cost of reducing unemployment more rapidly by expansionary fiscal and monetary policies is a permanently higher inflation rate.

Figure 33-4 ​ -Which panel in Figure 33-4 shows what happened in 2007-2009?

If business fluctuations are from demand-side forces,

In what way do policymakers have to face a trade-off between inflation and unemployment?

An example of indexing is a "cost of living" adjustment clause in a wage contract.

If policymakers do nothing in response to an inflationary gap, what will happen?

If expectations are rational, forecasting errors are pure random numbers.

If unemployment and inflation move inversely, then we can infer that business fluctuations are

A reduction in the rate of inflation is known as

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

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 33-6 -The short-run Phillips curve in Figure 33-6 would include which of the following points?

Figure 33-7 -In Figure 33-7, the case for expansionary monetary policy and fiscal policy is strongest at point

Figure 33-8 -In Figure 33-8, which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

Figure 33-4 -Which panel in Figure 33-4 shows what happened in 2007-2009?