Question 1

If the short-run Phillips curve shifts to the right, we can conclude that:

Accepted Answer

A)  the tradeoff between inflation and unemployment has improved over time. 
B)  the tradeoff between inflation and unemployment has worsened over time. 
C)  the inflation rate associated with any given level of unemployment has declined. 
D)  the unemployment rate has fallen for any given inflation rate. 
E)  the tradeoff between inflation and unemployment has remained unchanged. 
A)  the tradeoff between inflation and unemployment has improved over time. 
B)  the tradeoff between inflation and unemployment has worsened over time. 
C)  the inflation rate associated with any given level of unemployment has declined. 
D)  the unemployment rate has fallen for any given inflation rate. 
E)  the tradeoff between inflation and unemployment has remained unchanged.

Question 2

The figure given below depicts the long run equilibrium in an economy.
Figure 14.1
   In the figure:
ADS1U1B11S1U1B0 and ADS1U1B12S1U1B0: Aggregate demand curves
ASS1U1B11S1U1B0 and ASS1U1B12S1U1B0: Aggregate supply curves
-Refer to Figure 14.1. Movement from point A to point C is equivalent to:

Accepted Answer

A)  a movement up the long-run Phillips curve. 
B)  an outward shift of the short-run Phillips curve. 
C)  a movement up the short-run Phillips curve. 
D)  an inward shift of the long-run Phillips curve. 
E)  a movement down the long-run Phillips curve. 
A)  a movement up the long-run Phillips curve. 
B)  an outward shift of the short-run Phillips curve. 
C)  a movement up the short-run Phillips curve. 
D)  an inward shift of the long-run Phillips curve. 
E)  a movement down the long-run Phillips curve.

Question 3

More stable macroeconomic policy does not contribute to less variability in real output.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that the Fed announces a low-money-growth policy to control inflation and workers sign low-wage contracts as a result. If instead, the Fed had implemented a high-money-growth policy, which of the following would not occur?

Accepted Answer

A)  The unemployment rate would increase 
B)  The Fed's stated policy would be time inconsistent 
C)  The unemployment rate would be less than the natural rate 
D)  The Fed would not achieve credibility through its actions 
E)  The rate of inflation would be higher than expected 
A)  The unemployment rate would increase 
B)  The Fed's stated policy would be time inconsistent 
C)  The unemployment rate would be less than the natural rate 
D)  The Fed would not achieve credibility through its actions 
E)  The rate of inflation would be higher than expected

Question 5

When aggregate demand is lower than expected, inventories decline and the rate of unemployment falls.

Accepted Answer

A) True 
 B)False

Question 6

Government spending can be financed by all of the following, except:

Accepted Answer

A)  personal income taxes. 
B)  investment spending. 
C)  government borrowing. 
D)  money creation. 
E)  excise taxes. 
A)  personal income taxes. 
B)  investment spending. 
C)  government borrowing. 
D)  money creation. 
E)  excise taxes.

Question 7

Which of the following factors have not contributed to the "Great Moderation" of real GDP in the U.S. over the past 20 years?

Accepted Answer

A)  Better inventory management 
B)  Better macroeconomic policy 
C)  Greater availability of financial products for lending and borrowing 
D)  Imposition of ceiling on interest rates 
E)  Smaller real shocks 
A)  Better inventory management 
B)  Better macroeconomic policy 
C)  Greater availability of financial products for lending and borrowing 
D)  Imposition of ceiling on interest rates 
E)  Smaller real shocks

Question 8

Which of the following would not be considered a real variable in determining a real business cycle?

Accepted Answer

A)  A change in technology 
B)  A labor strike 
C)  An increase in the money supply 
D)  A change in tastes 
E)  A substantial weather event 
A)  A change in technology 
B)  A labor strike 
C)  An increase in the money supply 
D)  A change in tastes 
E)  A substantial weather event

Question 9

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

Accepted Answer

A)  $10 billion. 
B)  $15 billion. 
C)  $20 billion. 
D)  $35 billion. 
E)  $45 billion. 
A)  $10 billion. 
B)  $15 billion. 
C)  $20 billion. 
D)  $35 billion. 
E)  $45 billion.

Question 10

If the Fed aims to achieve a level of unemployment below its natural rate, it must follow time-inconsistent policies.

Accepted Answer

A) True 
 B)False

Question 11

In the short run, an expansionary monetary policy by the Fed would:

Accepted Answer

A)  reduce unemployment at the cost of higher inflation. 
B)  reduce inflation at the cost of a rise in the natural rate of unemployment. 
C)  reduce inflation and leave the natural unemployment rate unchanged. 
D)  reduce both inflation and unemployment. 
E)  increase both inflation and unemployment. 
A)  reduce unemployment at the cost of higher inflation. 
B)  reduce inflation at the cost of a rise in the natural rate of unemployment. 
C)  reduce inflation and leave the natural unemployment rate unchanged. 
D)  reduce both inflation and unemployment. 
E)  increase both inflation and unemployment.

Question 12

Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy. Which of the following will be observed?

Accepted Answer

A)  The actual inflation rate will match the low rate that people had expected. 
B)  The actual inflation rate will be higher than the natural rate. 
C)  The actual inflation rate will be higher than the low rate that people had expected. 
D)  The actual inflation rate will be lower than the high rate that people had expected. 
E)  The unemployment rate will be lower than the natural rate. 
A)  The actual inflation rate will match the low rate that people had expected. 
B)  The actual inflation rate will be higher than the natural rate. 
C)  The actual inflation rate will be higher than the low rate that people had expected. 
D)  The actual inflation rate will be lower than the high rate that people had expected. 
E)  The unemployment rate will be lower than the natural rate.

Question 13

The introduction of a new currency is generally sufficient to achieve a permanent reduction in the inflation rate.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following was sanctioned by the Zimbabwe government in January 2009 as a substitute currency?

Accepted Answer

A)  Japanese yen 
B)  Chinese yuan 
C)  Mexican peso 
D)  U.S. dollars 
E)  Argentine peso 
A)  Japanese yen 
B)  Chinese yuan 
C)  Mexican peso 
D)  U.S. dollars 
E)  Argentine peso

Question 15

The figure given below shows the Phillips curves of the U.S. economy during early 1960s to late 1970s.
Figure 14.2
  
-Refer to Figure 14.2. If the natural rate of unemployment is 5 percent, which of the following would cause a movement along Phillips curve III from point A to point B?

Accepted Answer

A)  An inward shift of the aggregate demand curve 
B)  An outward shift of the aggregate demand curve 
C)  A movement down along the aggregate supply curve 
D)  A movement down along the aggregate demand curve 
E)  A movement up along the aggregate demand curve 
A)  An inward shift of the aggregate demand curve 
B)  An outward shift of the aggregate demand curve 
C)  A movement down along the aggregate supply curve 
D)  A movement down along the aggregate demand curve 
E)  A movement up along the aggregate demand curve

Question 16

Suppose workers do not believe the Fed will implement its announced monetary policy plans and the Fed wants to achieve low unemployment. In this situation the Fed would be best off:

Accepted Answer

A)  implementing a policy of high money growth. 
B)  announcing and implementing a policy of low money growth. 
C)  announcing a policy of high money growth and implementing a policy of low money growth. 
D)  following a policy that forces the actual inflation rate below the expected inflation rate. 
E)  promoting a low rate of inflation and adjusting actual policy plans to economic conditions. 
A)  implementing a policy of high money growth. 
B)  announcing and implementing a policy of low money growth. 
C)  announcing a policy of high money growth and implementing a policy of low money growth. 
D)  following a policy that forces the actual inflation rate below the expected inflation rate. 
E)  promoting a low rate of inflation and adjusting actual policy plans to economic conditions.

Question 17

A recessionary real shock will:

Accepted Answer

A)  shift the aggregate demand curve to the left and reduce real GDP. 
B)  shift the aggregate demand curve to the right and increase real GDP. 
C)  shift the aggregate supply curve to the left and increase real GDP. 
D)  shift the aggregate supply curve to the left and reduce real GDP. 
E)  shift the aggregate supply curve to the right and increase real GDP. 
A)  shift the aggregate demand curve to the left and reduce real GDP. 
B)  shift the aggregate demand curve to the right and increase real GDP. 
C)  shift the aggregate supply curve to the left and increase real GDP. 
D)  shift the aggregate supply curve to the left and reduce real GDP. 
E)  shift the aggregate supply curve to the right and increase real GDP.

If the short-run Phillips curve shifts to the right, we can conclude that:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves -Refer to Figure 14.1. Movement from point A to point C is equivalent to:

More stable macroeconomic policy does not contribute to less variability in real output.

Suppose that the Fed announces a low-money-growth policy to control inflation and workers sign low-wage contracts as a result. If instead, the Fed had implemented a high-money-growth policy, which of the following would not occur?

When aggregate demand is lower than expected, inventories decline and the rate of unemployment falls.

Government spending can be financed by all of the following, except:

Which of the following factors have not contributed to the "Great Moderation" of real GDP in the U.S. over the past 20 years?

Which of the following would not be considered a real variable in determining a real business cycle?

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

If the Fed aims to achieve a level of unemployment below its natural rate, it must follow time-inconsistent policies.

In the short run, an expansionary monetary policy by the Fed would:

Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy. Which of the following will be observed?

The introduction of a new currency is generally sufficient to achieve a permanent reduction in the inflation rate.

Which of the following was sanctioned by the Zimbabwe government in January 2009 as a substitute currency?

The figure given below shows the Phillips curves of the U.S. economy during early 1960s to late 1970s. Figure 14.2 -Refer to Figure 14.2. If the natural rate of unemployment is 5 percent, which of the following would cause a movement along Phillips curve III from point A to point B?

Suppose workers do not believe the Fed will implement its announced monetary policy plans and the Fed wants to achieve low unemployment. In this situation the Fed would be best off:

A recessionary real shock will:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

If the short-run Phillips curve shifts to the right, we can conclude that:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD1 and AD2: Aggregate demand curves AS1 and AS2: Aggregate supply curves -Refer to Figure 14.1. Movement from point A to point C is equivalent to:

More stable macroeconomic policy does not contribute to less variability in real output.

Suppose that the Fed announces a low-money-growth policy to control inflation and workers sign low-wage contracts as a result. If instead, the Fed had implemented a high-money-growth policy, which of the following would not occur?

When aggregate demand is lower than expected, inventories decline and the rate of unemployment falls.

Government spending can be financed by all of the following, except:

Which of the following factors have not contributed to the "Great Moderation" of real GDP in the U.S. over the past 20 years?

Which of the following would not be considered a real variable in determining a real business cycle?

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

If the Fed aims to achieve a level of unemployment below its natural rate, it must follow time-inconsistent policies.

In the short run, an expansionary monetary policy by the Fed would:

Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy. Which of the following will be observed?

The introduction of a new currency is generally sufficient to achieve a permanent reduction in the inflation rate.

Which of the following was sanctioned by the Zimbabwe government in January 2009 as a substitute currency?

The figure given below shows the Phillips curves of the U.S. economy during early 1960s to late 1970s. Figure 14.2 -Refer to Figure 14.2. If the natural rate of unemployment is 5 percent, which of the following would cause a movement along Phillips curve III from point A to point B?

Suppose workers do not believe the Fed will implement its announced monetary policy plans and the Fed wants to achieve low unemployment. In this situation the Fed would be best off:

A recessionary real shock will:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves -Refer to Figure 14.1. Movement from point A to point C is equivalent to: