Question 1

A vertical long-run Phillips curve is a vertical straight line at the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 2

A movement from an upper point to a lower point on the Phillips curve shows

Accepted Answer

A) decrease in the inflation and decrease in the unemployment. 
B) increase in the inflation and decrease in the employment. 
C) increase in the inflation and increase in the employment. 
D) decrease in the inflation and increase in the unemployment. 
A) decrease in the inflation and decrease in the unemployment. 
B) increase in the inflation and decrease in the employment. 
C) increase in the inflation and increase in the employment. 
D) decrease in the inflation and increase in the unemployment.

Question 3

Most economists think that, in the short run, there is

Accepted Answer

A) a trade-off between inflation and unemployment, but not in the long run. 
B) no trade-off between inflation and unemployment, nor is there one in the long run. 
C) a trade-off between inflation and unemployment, and in the long run also. 
D) no trade-off between inflation and unemployment, but there is one in the long run also. 
A) a trade-off between inflation and unemployment, but not in the long run. 
B) no trade-off between inflation and unemployment, nor is there one in the long run. 
C) a trade-off between inflation and unemployment, and in the long run also. 
D) no trade-off between inflation and unemployment, but there is one in the long run also.

Question 4

The short-run aggregate supply curve is vertical when inflation is predicted accurately.

Accepted Answer

A) True 
 B)False

Question 5

Some economists argue that there is no such thing as a short-run Phillips curve.Who are these economists and what is their argument?

Accepted Answer

The theory of rational expectations disa

Question 6

Which of the following could trigger supply-side inflation?

Accepted Answer

A) A decrease in the wage rate for all workers 
B) An increase in raw materials' prices 
C) An increase in the productivity of capital 
D) An increase in the labor force 
A) A decrease in the wage rate for all workers 
B) An increase in raw materials' prices 
C) An increase in the productivity of capital 
D) An increase in the labor force

Question 7

Empirical research suggests that the steepness of the aggregate supply curve depends on the

Accepted Answer

A) size of the multiplier. 
B) interest rate. 
C) level of wage rate. 
D) amount of excess capacity in the economy. 
A) size of the multiplier. 
B) interest rate. 
C) level of wage rate. 
D) amount of excess capacity in the economy.

Question 8

Inflation targeting requires monetary policymakers to rely heavily on the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) Economy is experiencing supply-side inflation. 
B) Policymakers have chosen to fight inflation rather than unemployment. 
C) The increase in aggregate demand has increased prices but not real GDP. 
D) The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation. 
A) Economy is experiencing supply-side inflation. 
B) Policymakers have chosen to fight inflation rather than unemployment. 
C) The increase in aggregate demand has increased prices but not real GDP. 
D) The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.

Question 10

A supply shock is an event that directly alters firms' costs and prices, shifting the economy's aggregate supply and thus the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 11

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called the

Accepted Answer

A) ideal rate of unemployment. 
B) natural rate of unemployment. 
C) full rate of unemployment. 
D) mature rate of unemployment. 
A) ideal rate of unemployment. 
B) natural rate of unemployment. 
C) full rate of unemployment. 
D) mature rate of unemployment.

Question 12

Reducing aggregate demand to fight inflation will cause higher unemployment.

Accepted Answer

A) True 
 B)False

Question 13

There is no long-run trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 14

The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increases prices and decreases unemployment.

Accepted Answer

A) True 
 B)False

Question 15

Demand-side inflation differs from supply-side inflation in which of the following ways?

Accepted Answer

A) Demand-side inflation has higher output; supply-side inflation has lower output. 
B) Demand-side inflation has lower output; supply-side inflation has higher output. 
C) Demand-side inflation is always followed by stagflation; supply-side inflation is always followed by demand-side inflation. 
D) Demand-side inflation has a self-correcting mechanism; supply-side inflation does not. 
A) Demand-side inflation has higher output; supply-side inflation has lower output. 
B) Demand-side inflation has lower output; supply-side inflation has higher output. 
C) Demand-side inflation is always followed by stagflation; supply-side inflation is always followed by demand-side inflation. 
D) Demand-side inflation has a self-correcting mechanism; supply-side inflation does not.

Question 16

In the long run, the unemployment rate is independent of inflation, and the Phillips curve is vertical at the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 17

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

Accepted Answer

A) falling interest rates that shift the aggregate demand curve outward. 
B) falling wage rates that shift the aggregate supply curve outward. 
C) rising wage rates that shift the aggregate supply curve inward. 
D) increases in the price level that shift the aggregate supply curve inward. 
A) falling interest rates that shift the aggregate demand curve outward. 
B) falling wage rates that shift the aggregate supply curve outward. 
C) rising wage rates that shift the aggregate supply curve inward. 
D) increases in the price level that shift the aggregate supply curve inward.

Question 18

Along a short-run Phillips curve, a higher rate of inflation is associated with a lower unemployment rate.

Accepted Answer

A) True 
 B)False

Question 19

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

Accepted Answer

A) have a positive slope. 
B) have a negative slope. 
C) be vertical. 
D) be horizontal. 
A) have a positive slope. 
B) have a negative slope. 
C) be vertical. 
D) be horizontal.

Question 20

If policymakers 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.

Exam 33: The Trade-Off Between Inflation and Unemployment

A vertical long-run Phillips curve is a vertical straight line at the natural rate of unemployment.

A movement from an upper point to a lower point on the Phillips curve shows

Most economists think that, in the short run, there is

The short-run aggregate supply curve is vertical when inflation is predicted accurately.

Some economists argue that there is no such thing as a short-run Phillips curve.Who are these economists and what is their argument?

Which of the following could trigger supply-side inflation?

Empirical research suggests that the steepness of the aggregate supply curve depends on the

Inflation targeting requires monetary policymakers to rely heavily on the Phillips curve.

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

A supply shock is an event that directly alters firms' costs and prices, shifting the economy's aggregate supply and thus the Phillips curve.

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called the

Reducing aggregate demand to fight inflation will cause higher unemployment.

There is no long-run trade-off between inflation and unemployment.

The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increases prices and decreases unemployment.

Demand-side inflation differs from supply-side inflation in which of the following ways?

In the long run, the unemployment rate is independent of inflation, and the Phillips curve is vertical at the natural rate of unemployment.

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

Along a short-run Phillips curve, a higher rate of inflation is associated with a lower unemployment rate.

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

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

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?