Question 1

An increase in the price of foreign oil can shift the economy's aggregate supply curve _____ resulting in inflation.

Accepted Answer

A) inward 
B) outward 
C) along the curve 
D) None of the above is correct. 
A) inward 
B) outward 
C) along the curve 
D) None of the above is correct.

Question 2

Recessionary gaps lead to falling inflation and falling unemployment.

Accepted Answer

A) True 
 B)False

Question 3

Most economists today believe that the Phillips curve is

Accepted Answer

A) vertical in the short run but downward sloping in the long run. 
B) upward sloping in the short run but vertical in the long run. 
C) downward sloping in the short run but vertical in the long run. 
D) vertical in the short run but upward sloping in the long run. 
A) vertical in the short run but downward sloping in the long run. 
B) upward sloping in the short run but vertical in the long run. 
C) downward sloping in the short run but vertical in the long run. 
D) vertical in the short run but upward sloping in the long run.

Question 4

Economist A.W.Phillips found a negative correlation between wage inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 5

If you believe that expectations react slowly, you are likely

Accepted Answer

A) a believer in rational expectations. 
B) a Keynesian. 
C) a theoretical economist. 
D) None of the above is correct. 
A) a believer in rational expectations. 
B) a Keynesian. 
C) a theoretical economist. 
D) None of the above is correct.

Question 6

In the short run, fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

Accepted Answer

A) the Fed and Congress rarely agree on policy. 
B) one controls aggregate demand, the other controls aggregate supply. 
C) both policies control only aggregate supply. 
D) both policies control only aggregate demand. 
A) the Fed and Congress rarely agree on policy. 
B) one controls aggregate demand, the other controls aggregate supply. 
C) both policies control only aggregate supply. 
D) both policies control only aggregate demand.

Question 7

The theory of rational expectations says that

Accepted Answer

A) workers make excellent choices of places to work. 
B) workers make the best possible forecasts of inflation. 
C) economists make rational expectations of inflation. 
D) economists expect workers to be rational. 
A) workers make excellent choices of places to work. 
B) workers make the best possible forecasts of inflation. 
C) economists make rational expectations of inflation. 
D) economists expect workers to be rational.

Question 8

Aggregate demand grows because

Accepted Answer

A) patent laws protect and stimulate new inventions. 
B) there is more machinery and technology improvement. 
C) the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. 
D) All of these responses are correct. 
A) patent laws protect and stimulate new inventions. 
B) there is more machinery and technology improvement. 
C) the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. 
D) All of these responses are correct.

Question 9

Many economists think that, in the long run, the economy tends to move toward

Accepted Answer

A) the natural or full-employment rate of unemployment. 
B) the natural or full-employment rate of inflation. 
C) a severe slump with high unemployment. 
D) an accelerating rate of inflation. 
A) the natural or full-employment rate of unemployment. 
B) the natural or full-employment rate of inflation. 
C) a severe slump with high unemployment. 
D) an accelerating rate of inflation.

Question 10

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 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 fluctuations in economic activity emanate from the supply side, higher rates of inflation will be associated with higher rates of unemployment, and lower rates of inflation will be associated with lower rates of unemployment.

Accepted Answer

A) True 
 B)False

Question 13

If strong fiscal 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

If policymakers do nothing in response to 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 15

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 16

Figure 33-1
​  
-Which of the following is true about the economy depicted in Figure 33-1?

Accepted Answer

A) Tax incentives are being used to stimulate aggregate supply. 
B) Policymakers 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) Policymakers 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 17

Figure 33-4
​  
-Figure 33-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Accepted Answer

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

Question 18

If aggregate demand grows faster than aggregate supply, the equilibrium price level will rise.

Accepted Answer

A) True 
 B)False

Question 19

If you believe that expectations react quickly, you are likely a

Accepted Answer

A) believer in rational expectations. 
B) Keynesian. 
C) theoretical economist. 
D) None of the above is correct. 
A) believer in rational expectations. 
B) Keynesian. 
C) theoretical economist. 
D) None of the above is correct.

Question 20

What reasons would economists give for an increase in the natural rate of unemployment that could have occurred from 2007 to 2011? What argument would suggest that the natural rate of unemployment may not have risen?

Accepted Answer

Some economists claimed that certain job

Exam 33: The Trade-Off Between Inflation and Unemployment

An increase in the price of foreign oil can shift the economy's aggregate supply curve _____ resulting in inflation.

Recessionary gaps lead to falling inflation and falling unemployment.

Most economists today believe that the Phillips curve is

Economist A.W.Phillips found a negative correlation between wage inflation and unemployment.

If you believe that expectations react slowly, you are likely

In the short run, fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

The theory of rational expectations says that

Aggregate demand grows because

Many economists think that, in the long run, the economy tends to move toward

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

The intent of indexing is to

If fluctuations in economic activity emanate from the supply side, higher rates of inflation will be associated with higher rates of unemployment, and lower rates of inflation will be associated with lower rates of unemployment.

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

If policymakers do nothing in response to a recessionary gap, what will happen?

On the vertical axis, the Phillips curve depicts the

Figure 33-1 ​ -Which of the following is true about the economy depicted in Figure 33-1?

Figure 33-4 ​ -Figure 33-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

If aggregate demand grows faster than aggregate supply, the equilibrium price level will rise.

If you believe that expectations react quickly, you are likely a

What reasons would economists give for an increase in the natural rate of unemployment that could have occurred from 2007 to 2011? What argument would suggest that the natural rate of unemployment may not have risen?

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 33-1 -Which of the following is true about the economy depicted in Figure 33-1?

Figure 33-4 -Figure 33-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?