Question 1

Figure 33-8
 
In Figure 33-8, which of the following points cannot be observed in the long run?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  E 
A)  A 
B)  B 
C)  C 
D)  E

Question 2

If workers and firms forecast inflation accurately,

Accepted Answer

A)  the aggregate supply curve will be vertical. 
B)  the real wage will not decline as the price level rises. 
C)  workers will not lose from inflation, and firms will not gain. 
D)  All of these responses are correct. 
A)  the aggregate supply curve will be vertical. 
B)  the real wage will not decline as the price level rises. 
C)  workers will not lose from inflation, and firms will not gain. 
D)  All of these responses are correct.

Question 3

Figure 33-8
 
In Figure 33-8, which of the following movements reflects the closing of an inflationary gap through the economy's self-correcting mechanism?

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 4

An example of indexing is a "cost of living" adjustment clause in a wage contract.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Figure 33-3
 
Given the situation in graph (1) in Figure 33-3, what movement would be expected in graph (2) from the economy's self-correcting mechanism?

Accepted Answer

A)  A to B 
B)  A to D 
C)  C to E 
D)  D to C 
A)  A to B 
B)  A to D 
C)  C to E 
D)  D to C

Question 7

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 8

Stagflation can be defined as a situation characterized by

Accepted Answer

A)  rising prices and rising output. 
B)  rising prices and falling output. 
C)  falling prices and falling output. 
D)  falling prices and rising output. 
A)  rising prices and rising output. 
B)  rising prices and falling output. 
C)  falling prices and falling output. 
D)  falling prices and rising output.

Question 9

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 10

One piece of evidence that business fluctuations are caused by demand-side changes would be that

Accepted Answer

A)  monetary and fiscal policy will move inversely. 
B)  interest rates and budget deficits will move inversely. 
C)  unemployment and inflation will move inversely. 
D)  unemployment and budget deficits will move inversely. 
A)  monetary and fiscal policy will move inversely. 
B)  interest rates and budget deficits will move inversely. 
C)  unemployment and inflation will move inversely. 
D)  unemployment and budget deficits will move inversely.

Question 11

If unemployment and inflation always move in the same direction, then we can infer that business fluctuations are

Accepted Answer

A)  from the demand side. 
B)  from the supply side. 
C)  from both the demand and supply side. 
D)  purely random events. 
A)  from the demand side. 
B)  from the supply side. 
C)  from both the demand and supply side. 
D)  purely random events.

Question 12

If policymakers do nothing in response to an inflationary 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 higher 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 higher unemployment and higher inflation 
D)  A slow movement toward lower unemployment and lower inflation

Question 13

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 14

A reduction in the rate of inflation is known as

Accepted Answer

A)  disinflation. 
B)  deflation. 
C)  inflation. 
D)  None of the above is correct. 
A)  disinflation. 
B)  deflation. 
C)  inflation. 
D)  None of the above is correct.

Question 15

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 16

Figure 33-6
 
If Figure 33-6 (a) illustrates the elimination of a recessionary gap, then the economy should move to what point on the curves shown in Figure 33-6 (b)?

Accepted Answer

A)  From e to r 
B)  From g to j 
C)  From r to j 
D)  From r to m 
A)  From e to r 
B)  From g to j 
C)  From r to j 
D)  From r to m

Question 17

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.

Question 18

The Phillips curve is a statistical relationship that was misrepresented as showing

Accepted Answer

A)  disequilibrium outcomes of uncoordinated policy. 
B)  alternative equilibrium points that the economy could achieve. 
C)  the unemployment rates necessary to close a recessionary gap. 
D)  the increases in interest rates from different inflation rates. 
A)  disequilibrium outcomes of uncoordinated policy. 
B)  alternative equilibrium points that the economy could achieve. 
C)  the unemployment rates necessary to close a recessionary gap. 
D)  the increases in interest rates from different inflation rates.

Question 19

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 20

A decrease in AS 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.

Exam 33: The Trade-Off Between Inflation and Unemployment

Figure 33-8 In Figure 33-8, which of the following points cannot be observed in the long run?

If workers and firms forecast inflation accurately,

Figure 33-8 In Figure 33-8, which of the following movements reflects the closing of an inflationary gap through the economy's self-correcting mechanism?

An example of indexing is a "cost of living" adjustment clause in a wage contract.

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

Figure 33-3 Given the situation in graph (1) in Figure 33-3, what movement would be expected in graph (2) from the economy's self-correcting mechanism?

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

Stagflation can be defined as a situation characterized by

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?

One piece of evidence that business fluctuations are caused by demand-side changes would be that

If unemployment and inflation always move in the same direction, then we can infer that business fluctuations are

If policymakers do nothing in response to an inflationary gap, what will happen?

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

A reduction in the rate of inflation is known as

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

Figure 33-6 If Figure 33-6 (a) illustrates the elimination of a recessionary gap, then the economy should move to what point on the curves shown in Figure 33-6 (b)?

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

The Phillips curve is a statistical relationship that was misrepresented as showing

On the vertical axis, the Phillips curve depicts the

A decrease in AS will trigger less inflation under which of the following conditions?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

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