Question 1

The rational expectations hypothesis is impeccably logical,but inconsistent with the facts.

Accepted Answer

A) True 
 B)False

Question 2

In the rational expectations model,government control over aggregate demand

Accepted Answer

A)  can affect real output only if policies are unexpected. 
B)  has potential to change real output as long as aggregate supply is vertical. 
C)  gives it the ability to change real output and employment. 
D)  does not influence the economic behavior of individuals. 
A)  can affect real output only if policies are unexpected. 
B)  has potential to change real output as long as aggregate supply is vertical. 
C)  gives it the ability to change real output and employment. 
D)  does not influence the economic behavior of individuals.

Question 3

An inflationary gap will eliminate itself through a process of price increases.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Figure 17-8
  
-In Figure 17-8,which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

Accepted Answer

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

Question 6

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 the above 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 the above are correct.

Question 7

Most economists reject the theory of rational expectations because

Accepted Answer

A)  expectations adjust very quickly. 
B)  workers receive wage increases in advance of inflation. 
C)  the short-run aggregate supply curve is vertical. 
D)  labor contracts tend to embody past inflation rates. 
A)  expectations adjust very quickly. 
B)  workers receive wage increases in advance of inflation. 
C)  the short-run aggregate supply curve is vertical. 
D)  labor contracts tend to embody past inflation rates.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Figure 17-4
  
-Which panel in Figure 17-4 shows what happened in 2007-2009?

Accepted Answer

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

Question 10

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 11

If the U.S.economy had grown faster than it actually did from 2009 to 2010,the unemployment rate would have been higher.

Accepted Answer

A) True 
 B)False

Question 12

Figure 17-8
  
-In Figure 17-8,which of the following movements reflects the closing of a recessionary gap with an expansionary monetary and fiscal policy?

Accepted Answer

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

Question 13

What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?

Accepted Answer

A)  Demand-side inflation is short-lived, while supply-side inflation lasts for a long time. 
B)  Demand-side inflation leads to budget surpluses, while supply-side inflation contributes to budget deficits. 
C)  Supply-side inflation is subject to control of policy makers, while demand-side inflation is beyond their reach. 
D)  Demand-side inflation is normally accompanied by rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
A)  Demand-side inflation is short-lived, while supply-side inflation lasts for a long time. 
B)  Demand-side inflation leads to budget surpluses, while supply-side inflation contributes to budget deficits. 
C)  Supply-side inflation is subject to control of policy makers, while demand-side inflation is beyond their reach. 
D)  Demand-side inflation is normally accompanied by rising real GDP, while supply-side inflation may be accompanied by falling real GDP.

Question 14

Figure 17-4
  
-Which panel in Figure 17-4 shows the movement associated with a demand-side inflation?

Accepted Answer

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

Question 15

The supply-side shocks of the 1970s shifted the aggregate supply curve inward.

Accepted Answer

A) True 
 B)False

Question 16

Figure 17-1
  
-Which of the following is t about the economy depicted in Figure 17-1?

Accepted Answer

A)  Tax incentives are being used to stimulate aggregate supply. 
B)  Policy makers 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)  Policy makers 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 17

Figure 17-4
  
-Which panel in Figure 17-4 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 18

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 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 the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases,then data would show the most rapid inflation occurs when

Accepted Answer

A)  unemployment is the highest, and the lowest inflation occurs when unemployment is the lowest. 
B)  AS grows most rapidly, and the lowest inflation occurs when AS grows most slowly. 
C)  AD rises most slowly, and the lowest inflation occurs when AD rises most rapidly. 
D)  output grows most rapidly and the lowest inflation when output grows most slowly. 
A)  unemployment is the highest, and the lowest inflation occurs when unemployment is the lowest. 
B)  AS grows most rapidly, and the lowest inflation occurs when AS grows most slowly. 
C)  AD rises most slowly, and the lowest inflation occurs when AD rises most rapidly. 
D)  output grows most rapidly and the lowest inflation when output grows most slowly.

The rational expectations hypothesis is impeccably logical,but inconsistent with the facts.

In the rational expectations model,government control over aggregate demand

An inflationary gap will eliminate itself through a process of price increases.

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?

Figure 17-8 -In Figure 17-8,which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

If workers and firms forecast inflation accurately,

Most economists reject the theory of rational expectations because

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

Figure 17-4 -Which panel in Figure 17-4 shows what happened in 2007-2009?

Stagflation can be defined as a situation characterized by

If the U.S.economy had grown faster than it actually did from 2009 to 2010,the unemployment rate would have been higher.

Figure 17-8 -In Figure 17-8,which of the following movements reflects the closing of a recessionary gap with an expansionary monetary and fiscal policy?

What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?

Figure 17-4 -Which panel in Figure 17-4 shows the movement associated with a demand-side inflation?

The supply-side shocks of the 1970s shifted the aggregate supply curve inward.

Figure 17-1 -Which of the following is t about the economy depicted in Figure 17-1?

Figure 17-4 -Which panel in Figure 17-4 shows the movement associated with the supply-side changes of the 1990s?

On the vertical axis,the Phillips curve depicts the

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

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases,then data would show the most rapid inflation occurs when

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

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Exam 17: The Trade Off between Inflation and Unemployment

The rational expectations hypothesis is impeccably logical,but inconsistent with the facts.

In the rational expectations model,government control over aggregate demand

An inflationary gap will eliminate itself through a process of price increases.

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?

Figure 17-8 -In Figure 17-8,which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

If workers and firms forecast inflation accurately,

Most economists reject the theory of rational expectations because

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

Figure 17-4 -Which panel in Figure 17-4 shows what happened in 2007-2009?

Stagflation can be defined as a situation characterized by

If the U.S.economy had grown faster than it actually did from 2009 to 2010,the unemployment rate would have been higher.

Figure 17-8 -In Figure 17-8,which of the following movements reflects the closing of a recessionary gap with an expansionary monetary and fiscal policy?

What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?

Figure 17-4 -Which panel in Figure 17-4 shows the movement associated with a demand-side inflation?

The supply-side shocks of the 1970s shifted the aggregate supply curve inward.

Figure 17-1 -Which of the following is t about the economy depicted in Figure 17-1?

Figure 17-4 -Which panel in Figure 17-4 shows the movement associated with the supply-side changes of the 1990s?

On the vertical axis,the Phillips curve depicts the

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

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases,then data would show the most rapid inflation occurs when

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

Filters