Question 1

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

Accepted Answer

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

Question 2

The origin of the Phillips curve is the idea that an increase in

Accepted Answer

A) AD will lead to more inflation and more unemployment. 
B) AD will lead to more inflation and lower unemployment. 
C) AS will lead to lower inflation and lower unemployment. 
D) AS will lead to less inflation and higher unemployment. 
A) AD will lead to more inflation and more unemployment. 
B) AD will lead to more inflation and lower unemployment. 
C) AS will lead to lower inflation and lower unemployment. 
D) AS will lead to less inflation and higher unemployment.

Question 3

Which of the following observations concerning the Phillips curve is not true?

Accepted Answer

A) They are normally upward-sloping. 
B) They are more commonly constructed for price inflation. 
C) They depict the inverse relation between wage inflation and unemployment. 
D) They depict the rate of unemployment on the horizontal axis. 
A) They are normally upward-sloping. 
B) They are more commonly constructed for price inflation. 
C) They depict the inverse relation between wage inflation and unemployment. 
D) They depict the rate of unemployment on the horizontal axis.

Question 4

An increase in AD will trigger less inflation under which of the following conditions?

Accepted Answer

A) AD is relatively steep. 
B) AD is relatively flat. 
C) AS is relatively steep. 
D) AS is relatively flat. 
A) AD is relatively steep. 
B) AD is relatively flat. 
C) AS is relatively steep. 
D) AS is relatively flat.

Question 5

Opponents of indexing fear that it will lead to a(n)

Accepted Answer

A) acceleration of inflation. 
B) abrupt reduction of the money supply. 
C) shortfall of tax revenues, and increased budget deficits. 
D) unfair wealth transfer to debtors. 
A) acceleration of inflation. 
B) abrupt reduction of the money supply. 
C) shortfall of tax revenues, and increased budget deficits. 
D) unfair wealth transfer to debtors.

Question 6

One reason that the Phillips curve "broke down" is that it

Accepted Answer

A) is unable to explain short-run movements in inflation and unemployment, but does a better job of explaining long-run movements. 
B) assumes a quick-acting self-correcting mechanism, and the economy has a very slow self-correcting mechanism. 
C) is a statistical relationship, and some of the points are not sustainable in the long run. 
D) cannot explain demand-side inflation, and it collapsed when demand-side inflation was predominant in the 1970s. 
A) is unable to explain short-run movements in inflation and unemployment, but does a better job of explaining long-run movements. 
B) assumes a quick-acting self-correcting mechanism, and the economy has a very slow self-correcting mechanism. 
C) is a statistical relationship, and some of the points are not sustainable in the long run. 
D) cannot explain demand-side inflation, and it collapsed when demand-side inflation was predominant in the 1970s.

Question 7

Rational expectations are forecasts that, although not necessarily correct, are the best that can be made given the available information.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

The economy's self-correcting mechanism

Accepted Answer

A) tends to push unemployment toward a specific point called the natural rate of unemployment. 
B) works better at correcting inflationary gaps than recessionary gaps. 
C) cannot work if the Phillips curve is vertical. 
D) ensures that the economy will not have to endure a long period of high unemployment. 
A) tends to push unemployment toward a specific point called the natural rate of unemployment. 
B) works better at correcting inflationary gaps than recessionary gaps. 
C) cannot work if the Phillips curve is vertical. 
D) ensures that the economy will not have to endure a long period of high unemployment.

Question 10

Indexing seeks to reduce the social costs of inflation.

Accepted Answer

A) True 
 B)False

Question 11

If aggregate demand had grown faster than it did from 2009 to 2010, then the U.S.economy would have experienced

Accepted Answer

A) higher unemployment and higher inflation. 
B) lower unemployment and lower inflation. 
C) higher unemployment and lower inflation. 
D) lower unemployment and higher inflation. 
A) higher unemployment and higher inflation. 
B) lower unemployment and lower inflation. 
C) higher unemployment and lower inflation. 
D) lower unemployment and higher inflation.

Question 12

According to the theory of rational expectations, errors in predicting inflation will

Accepted Answer

A) be biased upward more often than not. 
B) be purely random. 
C) tend to be biased downward when inflation is rising and tend to be biased upward when inflation is falling. 
D) tend to be biased upward when inflation is rising and tend to be biased downward when inflation is falling. 
A) be biased upward more often than not. 
B) be purely random. 
C) tend to be biased downward when inflation is rising and tend to be biased upward when inflation is falling. 
D) tend to be biased upward when inflation is rising and tend to be biased downward when inflation is falling.

Question 13

In 2010, dissenters were worried that the effects of policies to reduce unemployment would create the conditions for

Accepted Answer

A) higher long-term inflation. 
B) a more horizontal Phillips curve. 
C) higher long-term unemployment. 
D) larger budget surpluses and, thus, higher interest rates. 
A) higher long-term inflation. 
B) a more horizontal Phillips curve. 
C) higher long-term unemployment. 
D) larger budget surpluses and, thus, higher interest rates.

Question 14

If the aggregate supply curve is vertical, then the short-run Phillips curve will

Accepted Answer

A) be horizontal. 
B) also be vertical. 
C) slope upward. 
D) slope downward. 
A) be horizontal. 
B) also be vertical. 
C) slope upward. 
D) slope downward.

Question 15

One way in which the Phillips curve is misinterpreted is to think of it as

Accepted Answer

A) a model of economic activity that explains changes in unemployment and inflation by changes in aggregate demand. 
B) a statistical relationship between inflation and unemployment. 
C) depicting a number of alternative equilibrium points the economy could achieve. 
D) All of these responses are correct. 
A) a model of economic activity that explains changes in unemployment and inflation by changes in aggregate demand. 
B) a statistical relationship between inflation and unemployment. 
C) depicting a number of alternative equilibrium points the economy could achieve. 
D) All of these responses are correct.

Question 16

Demand-side inflation is normally accompanied by

Accepted Answer

A) falling real GDP, while supply-side inflation may be accompanied by rising real GDP. 
B) falling real GDP; the same is true of supply-side inflation. 
C) rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
D) rising real GDP; the same is true of supply-side inflation. 
A) falling real GDP, while supply-side inflation may be accompanied by rising real GDP. 
B) falling real GDP; the same is true of supply-side inflation. 
C) rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
D) rising real GDP; the same is true of supply-side inflation.

Question 17

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

Accepted Answer

A) rational expectations 
B) irrational expectations 
C) no expectations 
D) None of the above is correct. 
A) rational expectations 
B) irrational expectations 
C) no expectations 
D) None of the above is correct.

Question 18

If inflationary expectations are quite sluggish (that is, they do not adapt quickly), then the short-run Phillips curve will

Accepted Answer

A) be vertical. 
B) be horizontal. 
C) slope downward. 
D) slope upward. 
A) be vertical. 
B) be horizontal. 
C) slope downward. 
D) slope upward.

Question 19

To make rational forecasts, your predictions do not have to be correct all of the time.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 33: The Trade-Off Between Inflation and Unemployment

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

The origin of the Phillips curve is the idea that an increase in

Which of the following observations concerning the Phillips curve is not true?

An increase in AD will trigger less inflation under which of the following conditions?

Opponents of indexing fear that it will lead to a(n)

One reason that the Phillips curve "broke down" is that it

Rational expectations are forecasts that, although not necessarily correct, are the best that can be made given the available information.

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?

The economy's self-correcting mechanism

Indexing seeks to reduce the social costs of inflation.

If aggregate demand had grown faster than it did from 2009 to 2010, then the U.S.economy would have experienced

According to the theory of rational expectations, errors in predicting inflation will

In 2010, dissenters were worried that the effects of policies to reduce unemployment would create the conditions for

If the aggregate supply curve is vertical, then the short-run Phillips curve will

One way in which the Phillips curve is misinterpreted is to think of it as

Demand-side inflation is normally accompanied by

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

If inflationary expectations are quite sluggish (that is, they do not adapt quickly), then the short-run Phillips curve will

To make rational forecasts, your predictions do not have to be correct all of the time.

If economic fluctuations originate on the supply side,

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

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