Question 1

All points on the long-run Phillips curve that are sustainable in the long run due to economy's self-correcting mechanism correspond to the

Accepted Answer

A) mature rate of unemployment. 
B) natural rate of unemployment. 
C) seasonal rate of unemployment. 
D) cyclical rate of unemployment. 
A) mature rate of unemployment. 
B) natural rate of unemployment. 
C) seasonal rate of unemployment. 
D) cyclical rate of unemployment.

Question 2

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 3

Which of the following factors contributed to the collapse of the Phillips curve in the 1970s?

Accepted Answer

A) Economic research proved there was no relationship between inflation and unemployment rates. 
B) The U.S.government was running triple-digit deficits in the 1970s, compounding the normal shifts in aggregate demand. 
C) The 1970s were full of adverse supply shocks such as the oil price increases of 1973-1974. 
D) The aggregate demand curve shifted to the left at the end of the Vietnam War. 
A) Economic research proved there was no relationship between inflation and unemployment rates. 
B) The U.S.government was running triple-digit deficits in the 1970s, compounding the normal shifts in aggregate demand. 
C) The 1970s were full of adverse supply shocks such as the oil price increases of 1973-1974. 
D) The aggregate demand curve shifted to the left at the end of the Vietnam War.

Question 4

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 5

In the face of the 2007-2009 recession, the President, Congress, and the Fed

Accepted Answer

A) decided to rely on the self-correcting mechanism of the economy to eliminate inflation. 
B) decided to rely on the self-correcting mechanism of the economy to reduce unemployment. 
C) pursued an active policy to balance the budget and fight inflation. 
D) pursued an active policy to expand aggregate demand. 
A) decided to rely on the self-correcting mechanism of the economy to eliminate inflation. 
B) decided to rely on the self-correcting mechanism of the economy to reduce unemployment. 
C) pursued an active policy to balance the budget and fight inflation. 
D) pursued an active policy to expand aggregate demand.

Question 6

If workers always see inflation coming, and if they demand wage increases in advance so that inflation does not erode real wages, then the economy's aggregate supply curve on the AD-AS diagram will

Accepted Answer

A) be a vertical line corresponding to potential GDP. 
B) be a horizontal line corresponding to potential GDP. 
C) slope downward. 
D) slope upward. 
A) be a vertical line corresponding to potential GDP. 
B) be a horizontal line corresponding to potential GDP. 
C) slope downward. 
D) slope upward.

Question 7

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

Accepted Answer

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

Question 8

The U.S.economy in the 1990s benefited from an aggregate supply curve shifting outward.

Accepted Answer

A) True 
 B)False

Question 9

Most economists and policymakers decided in 2007-2010 that reducing unemployment was the main national priority.

Accepted Answer

A) True 
 B)False

Question 10

Figure 33-4
​  
-Which panel in Figure 33-4 shows the movement associated with the supply-side changes of the 1990s?

Accepted Answer

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

Question 11

Inflation can be caused by rapid growth of aggregate demand or by sluggish growth of aggregate supply.

Accepted Answer

A) True 
 B)False

Question 12

At one time, policymakers 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 13

Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?

Accepted Answer

Borrowers and lenders normally incorpora

Question 14

If workers expect inflation, and tend to overestimate actual inflation when they negotiate wage increases, the result will be a continuing

Accepted Answer

A) shift of AD to the left. 
B) shift of AD to the right. 
C) recessionary gap. 
D) inflationary gap. 
A) shift of AD to the left. 
B) shift of AD to the right. 
C) recessionary gap. 
D) inflationary gap.

Question 15

Figure 33-8
​  
-In Figure 33-8, which of the following movements would you associate with a "negative supply shock"?

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 16

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 17

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 18

Which of the following led to the collapse of the Phillips curve?

Accepted Answer

A) Rightward shift in the demand for labor curve 
B) Leftward shift of the Phillips curve 
C) Leftward shift of the aggregate supply curve 
D) Rightward shift of the aggregate demand curve 
A) Rightward shift in the demand for labor curve 
B) Leftward shift of the Phillips curve 
C) Leftward shift of the aggregate supply curve 
D) Rightward shift of the aggregate demand curve

Question 19

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 20

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.

Exam 33: The Trade-Off Between Inflation and Unemployment

All points on the long-run Phillips curve that are sustainable in the long run due to economy's self-correcting mechanism correspond to the

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

Which of the following factors contributed to the collapse of the Phillips curve in the 1970s?

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

In the face of the 2007-2009 recession, the President, Congress, and the Fed

If workers always see inflation coming, and if they demand wage increases in advance so that inflation does not erode real wages, then the economy's aggregate supply curve on the AD-AS diagram will

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

The U.S.economy in the 1990s benefited from an aggregate supply curve shifting outward.

Most economists and policymakers decided in 2007-2010 that reducing unemployment was the main national priority.

Figure 33-4 ​ -Which panel in Figure 33-4 shows the movement associated with the supply-side changes of the 1990s?

Inflation can be caused by rapid growth of aggregate demand or by sluggish growth of aggregate supply.

At one time, policymakers 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?

Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?

If workers expect inflation, and tend to overestimate actual inflation when they negotiate wage increases, the result will be a continuing

Figure 33-8 ​ -In Figure 33-8, which of the following movements would you associate with a "negative supply shock"?

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

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

Which of the following led to the collapse of the Phillips curve?

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

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

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 33-4 -Which panel in Figure 33-4 shows the movement associated with the supply-side changes of the 1990s?

Figure 33-8 -In Figure 33-8, which of the following movements would you associate with a "negative supply shock"?