Question 1

Workers expecting inflation will expect wage increases to be built into their wage contracts.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Figure 17-7
  
-In Figure 17-7,the case for expansionary monetary policy and fiscal policy is strongest at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 4

The Phillips curve explains the trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 5

If expectations are rational,the difference between the actual rate of inflation and the expected rate of inflation will be zero.

Accepted Answer

A) True 
 B)False

Question 6

Most economists agree that the self-correcting mechanism works

Accepted Answer

A)  very slowly. 
B)  very rapidly. 
C)  rapidly in the short run and slowly in the long run. 
D)  slowly in the short run and rapidly in the long run. 
A)  very slowly. 
B)  very rapidly. 
C)  rapidly in the short run and slowly in the long run. 
D)  slowly in the short run and rapidly in the long run.

Question 7

The intent of indexing is to

Accepted Answer

A)  raise tax revenue automatically during inflation. 
B)  shift the short-run Phillips curve to the right. 
C)  take most of the sting out of inflation. 
D)  reduce inflation gradually. 
A)  raise tax revenue automatically during inflation. 
B)  shift the short-run Phillips curve to the right. 
C)  take most of the sting out of inflation. 
D)  reduce inflation gradually.

Question 8

Figure 17-6
  
-Figure 17-6 (b)illustrates that

Accepted Answer

A)  in the short run, it is possible to "ride the Phillips curve" down toward lower rates of inflation. 
B)  in the short run, it is possible to "ride the Phillips curve" up toward lower unemployment by stimulating aggregate demand. 
C)  the Phillips curve connecting points g, e, and r is not a menu of policy choices. 
D)  All of the above are correct. 
A)  in the short run, it is possible to "ride the Phillips curve" down toward lower rates of inflation. 
B)  in the short run, it is possible to "ride the Phillips curve" up toward lower unemployment by stimulating aggregate demand. 
C)  the Phillips curve connecting points g, e, and r is not a menu of policy choices. 
D)  All of the above are correct.

Question 9

If AD increases at a faster rate than AS,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 10

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

Accepted Answer

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

Question 11

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 12

The government can fight inflation by manipulating both aggregate demand and aggregate supply.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

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

Accepted Answer

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

Question 15

If unemployment and inflation move inversely,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 16

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 17

If policy makers do nothing in response to 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 18

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

Accepted Answer

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

Question 19

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

Accepted Answer

A)  Contango 
B)  Swap 
C)  Averaging 
D)  Indexing 
A)  Contango 
B)  Swap 
C)  Averaging 
D)  Indexing

Question 20

The Phillips curve shows the relationship between

Accepted Answer

A)  the rate of inflation and the rate of unemployment. 
B)  the rate of growth of real GDP and the rate of unemployment. 
C)  real prices and real GDP. 
D)  the rate of inflation and the rate of growth of real GDP. 
A)  the rate of inflation and the rate of unemployment. 
B)  the rate of growth of real GDP and the rate of unemployment. 
C)  real prices and real GDP. 
D)  the rate of inflation and the rate of growth of real GDP.

Workers expecting inflation will expect wage increases to be built into their wage contracts.

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

Figure 17-7 -In Figure 17-7,the case for expansionary monetary policy and fiscal policy is strongest at point

The Phillips curve explains the trade-off between inflation and unemployment.

If expectations are rational,the difference between the actual rate of inflation and the expected rate of inflation will be zero.

Most economists agree that the self-correcting mechanism works

The intent of indexing is to

Figure 17-6 -Figure 17-6 (b)illustrates that

If AD increases at a faster rate than AS,the result will be

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

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

The government can fight inflation by manipulating both aggregate demand and aggregate supply.

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

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

If unemployment and inflation move inversely,then we can infer that business fluctuations are

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

If policy makers do nothing in response to a recessionary gap,what will happen?

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

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

The Phillips curve shows the relationship between

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

Exam 17: The Trade Off between Inflation and Unemployment

Workers expecting inflation will expect wage increases to be built into their wage contracts.

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

Figure 17-7 -In Figure 17-7,the case for expansionary monetary policy and fiscal policy is strongest at point

The Phillips curve explains the trade-off between inflation and unemployment.

If expectations are rational,the difference between the actual rate of inflation and the expected rate of inflation will be zero.

Most economists agree that the self-correcting mechanism works

The intent of indexing is to

Figure 17-6 -Figure 17-6 (b)illustrates that

If AD increases at a faster rate than AS,the result will be

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

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

The government can fight inflation by manipulating both aggregate demand and aggregate supply.

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

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

If unemployment and inflation move inversely,then we can infer that business fluctuations are

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

If policy makers do nothing in response to a recessionary gap,what will happen?

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

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

The Phillips curve shows the relationship between

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