Question 1

A stimulus to aggregate demand will normally pull prices up but cause a reduction in output.

Accepted Answer

A) True 
 B)False

Question 2

If policy makers 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 3

Which of the following is most likely to result in unemployment?

Accepted Answer

A)  Aggregate demand grows more rapidly than aggregate supply. 
B)  Aggregate demand and aggregate supply grow at the same rate. 
C)  Aggregate supply grows more rapidly than aggregate demand. 
D)  Neither aggregate demand nor aggregate supply grows at all. 
A)  Aggregate demand grows more rapidly than aggregate supply. 
B)  Aggregate demand and aggregate supply grow at the same rate. 
C)  Aggregate supply grows more rapidly than aggregate demand. 
D)  Neither aggregate demand nor aggregate supply grows at all.

Question 4

Figure 17-8
  
-In Figure 17-8,policy makers can choose any of the following points as sustainable inflation-unemployment combinations:

Accepted Answer

A)  only E. 
B)  A or B. 
C)  A, B, C, D, E. 
D)  B, E, C. 
A)  only E. 
B)  A or B. 
C)  A, B, C, D, E. 
D)  B, E, C.

Question 5

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 6

Figure 17-8
  
-In Figure 17-8,which of the following movements illustrates the response of the economy to a stimulation of aggregate demand when workers systematically underpredict inflation?

Accepted Answer

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

Question 7

Figure 17-5
  
-Over a five-year period,economists observed that the unemployment-inflation relationship appeared as in Figure 17-5.Economic theory would conclude that the period

Accepted Answer

A)  was dominated by supply shocks such as increased energy and food costs. 
B)  was affected by both supply and demand shocks, with demand shocks dominating. 
C)  was dominated by demand-side changes. 
D)  cannot be explained because the relationship is the opposite of what the Phillips curve would predict. 
A)  was dominated by supply shocks such as increased energy and food costs. 
B)  was affected by both supply and demand shocks, with demand shocks dominating. 
C)  was dominated by demand-side changes. 
D)  cannot be explained because the relationship is the opposite of what the Phillips curve would predict.

Question 8

Policy makers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

Accepted Answer

A)  moderate fiscal stimulus, no monetary stimulus 
B)  fiscal and monetary tightness 
C)  moderate monetary stimulus, fiscal tightness 
D)  strong fiscal and monetary stimulus 
A)  moderate fiscal stimulus, no monetary stimulus 
B)  fiscal and monetary tightness 
C)  moderate monetary stimulus, fiscal tightness 
D)  strong fiscal and monetary stimulus

Question 9

In 2008-2010,American policy makers decided to risk

Accepted Answer

A)  higher inflation for the sake of decreasing unemployment. 
B)  higher unemployment to hold down inflation. 
C)  increasing taxes for the sake of reducing the budget deficit. 
D)  reducing government spending for the sake of balancing the budget. 
A)  higher inflation for the sake of decreasing unemployment. 
B)  higher unemployment to hold down inflation. 
C)  increasing taxes for the sake of reducing the budget deficit. 
D)  reducing government spending for the sake of balancing the budget.

Question 10

Aggregate supply tends to grow because

Accepted Answer

A)  there are more workers in the economy every year. 
B)  there is more capital in the economy every year. 
C)  technology tends to improve every year. 
D)  All of the above are correct. 
A)  there are more workers in the economy every year. 
B)  there is more capital in the economy every year. 
C)  technology tends to improve every year. 
D)  All of the above are correct.

Question 11

The economy's self-correcting mechanism ensures that neither recessionary nor inflationary gaps will be eliminated eventually.

Accepted Answer

A) True 
 B)False

Question 12

If workers demand wage compensation in advance of inflation,the economy's aggregate supply curve will

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be vertical. 
D)  be horizontal. 
A)  have a positive slope. 
B)  have a negative slope. 
C)  be vertical. 
D)  be horizontal.

Question 13

Aggregate demand grows because

Accepted Answer

A)  patent laws protect and stimulate new inventions. 
B)  there is more machinery and technology improves. 
C)  the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. 
D)  All of the above are correct. 
A)  patent laws protect and stimulate new inventions. 
B)  there is more machinery and technology improves. 
C)  the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. 
D)  All of the above are correct.

Question 14

As a generalization,it can be said that

Accepted Answer

A)  aggregate demand shifts to the right every year, but aggregate supply rarely does. 
B)  aggregate supply shifts to the right every year, but aggregate demand rarely does. 
C)  both aggregate demand and aggregate supply shift to the right each year. 
D)  neither aggregate demand nor aggregate supply curve shifts to the right each year. 
A)  aggregate demand shifts to the right every year, but aggregate supply rarely does. 
B)  aggregate supply shifts to the right every year, but aggregate demand rarely does. 
C)  both aggregate demand and aggregate supply shift to the right each year. 
D)  neither aggregate demand nor aggregate supply curve shifts to the right each year.

Question 15

The most extensive indexing in the United States is in

Accepted Answer

A)  interest payments on bonds or savings accounts. 
B)  government transfer payments, including Social Security benefits. 
C)  government contracts for military goods. 
D)  escalator clauses in wage and salary contracts. 
A)  interest payments on bonds or savings accounts. 
B)  government transfer payments, including Social Security benefits. 
C)  government contracts for military goods. 
D)  escalator clauses in wage and salary contracts.

Question 16

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Accepted Answer

A)  operating near full employment. 
B)  on the horizontal part of the aggregate supply curve. 
C)  operating with high unemployment. 
D)  operating with substantial excess capacity. 
A)  operating near full employment. 
B)  on the horizontal part of the aggregate supply curve. 
C)  operating with high unemployment. 
D)  operating with substantial excess capacity.

Question 17

Figure 17-8
  
-In Figure 17-8,which of the following movements reflects the closing of an inflationary gap through the economy's automatic adjustment 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 18

Which of the following could trigger demand-side inflation?

Accepted Answer

A)  a decrease in the money supply 
B)  an increase in taxes 
C)  an increase in government spending 
D)  an increase in interest rates 
A)  a decrease in the money supply 
B)  an increase in taxes 
C)  an increase in government spending 
D)  an increase in interest rates

Question 19

Fighting inflation by slowing the growth of aggregate demand is

Accepted Answer

A)  endorsed by most politicians. 
B)  a convenient way to reduce inflation. 
C)  unpopular with politicians. 
D)  always easily accepted by firms and workers. 
A)  endorsed by most politicians. 
B)  a convenient way to reduce inflation. 
C)  unpopular with politicians. 
D)  always easily accepted by firms and workers.

Question 20

If expectations are "rational," can the Fed control unemployment?

Accepted Answer

A)  Yes, provided it announces policy in advance. 
B)  Yes, if it affects the aggregate demand curve. 
C)  No, because aggregate supply is vertical even in the short run. 
D)  No, because only fiscal policy can affect unemployment. 
A)  Yes, provided it announces policy in advance. 
B)  Yes, if it affects the aggregate demand curve. 
C)  No, because aggregate supply is vertical even in the short run. 
D)  No, because only fiscal policy can affect unemployment.

A stimulus to aggregate demand will normally pull prices up but cause a reduction in output.

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

Which of the following is most likely to result in unemployment?

Figure 17-8 -In Figure 17-8,policy makers can choose any of the following points as sustainable inflation-unemployment combinations:

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

Figure 17-8 -In Figure 17-8,which of the following movements illustrates the response of the economy to a stimulation of aggregate demand when workers systematically underpredict inflation?

Figure 17-5 -Over a five-year period,economists observed that the unemployment-inflation relationship appeared as in Figure 17-5.Economic theory would conclude that the period

Policy makers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

In 2008-2010,American policy makers decided to risk

Aggregate supply tends to grow because

The economy's self-correcting mechanism ensures that neither recessionary nor inflationary gaps will be eliminated eventually.

If workers demand wage compensation in advance of inflation,the economy's aggregate supply curve will

Aggregate demand grows because

As a generalization,it can be said that

The most extensive indexing in the United States is in

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Figure 17-8 -In Figure 17-8,which of the following movements reflects the closing of an inflationary gap through the economy's automatic adjustment mechanism?

Which of the following could trigger demand-side inflation?

Fighting inflation by slowing the growth of aggregate demand is

If expectations are "rational," can the Fed control unemployment?

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

A stimulus to aggregate demand will normally pull prices up but cause a reduction in output.

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

Which of the following is most likely to result in unemployment?

Figure 17-8 -In Figure 17-8,policy makers can choose any of the following points as sustainable inflation-unemployment combinations:

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

Figure 17-8 -In Figure 17-8,which of the following movements illustrates the response of the economy to a stimulation of aggregate demand when workers systematically underpredict inflation?

Figure 17-5 -Over a five-year period,economists observed that the unemployment-inflation relationship appeared as in Figure 17-5.Economic theory would conclude that the period

Policy makers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

In 2008-2010,American policy makers decided to risk

Aggregate supply tends to grow because

The economy's self-correcting mechanism ensures that neither recessionary nor inflationary gaps will be eliminated eventually.

If workers demand wage compensation in advance of inflation,the economy's aggregate supply curve will

Aggregate demand grows because

As a generalization,it can be said that

The most extensive indexing in the United States is in

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Figure 17-8 -In Figure 17-8,which of the following movements reflects the closing of an inflationary gap through the economy's automatic adjustment mechanism?

Which of the following could trigger demand-side inflation?

Fighting inflation by slowing the growth of aggregate demand is

If expectations are "rational," can the Fed control unemployment?

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