Question 1

Wage and price controls have been proposed primarily as a means for dealing with

Accepted Answer

A)  severe recessionary conditions. 
B)  decreases in the price level. 
C)  income policies. 
D)  situations resulting from irresponsible decreases in the money supply. 
E)  supply-side inflation. 
A)  severe recessionary conditions. 
B)  decreases in the price level. 
C)  income policies. 
D)  situations resulting from irresponsible decreases in the money supply. 
E)  supply-side inflation. E

Question 2

Which of the following best describes the overall economic impact of the food and energy supply shocks in the 1970s?

Accepted Answer

A)  Many Americans began spending more in an effort to acquire needed goods before the shortages grew worse. 
B)  The economy experienced both rising price levels and increased unemployment. 
C)  The prices of food and oil products increased, but there was little impact on other sectors of the economy. 
D)  Because the U.S. economy is self-sufficient, these international supply shocks had little impact. 
E)  Many consumers responded by boycotting oil-related and food products, driving down the prices of these goods. 
A)  Many Americans began spending more in an effort to acquire needed goods before the shortages grew worse. 
B)  The economy experienced both rising price levels and increased unemployment. 
C)  The prices of food and oil products increased, but there was little impact on other sectors of the economy. 
D)  Because the U.S. economy is self-sufficient, these international supply shocks had little impact. 
E)  Many consumers responded by boycotting oil-related and food products, driving down the prices of these goods. B

Question 3

If individuals' expectations are formed adaptively

Accepted Answer

A)  short-run unemployment rates will rise at first, then fall. 
B)  antirecessionary fiscal and monetary policies will not affect the price level. 
C)  the long-run Phillips curve slopes downward. 
D)  policy efforts to reduce the unemployment rate below the natural rate have only a temporary impact. 
E)  the aggregate supply curve is horizontal. 
A)  short-run unemployment rates will rise at first, then fall. 
B)  antirecessionary fiscal and monetary policies will not affect the price level. 
C)  the long-run Phillips curve slopes downward. 
D)  policy efforts to reduce the unemployment rate below the natural rate have only a temporary impact. 
E)  the aggregate supply curve is horizontal. D

Question 4

The concept of the natural rate of unemployment

Accepted Answer

A)  states that higher inflationary rates are necessary to substantially reduce its value. 
B)  is credited to A. W. Phillips. 
C)  reflects, in part, the willingness of workers to remain voluntarily unemployed rather than take unattractive or lower-paying jobs. 
D)  reflects the fact that people are lazy and will not work unless they have to. 
E)  denotes workers temporarily unemployed as a result of expansionary monetary and fiscal policies. 
A)  states that higher inflationary rates are necessary to substantially reduce its value. 
B)  is credited to A. W. Phillips. 
C)  reflects, in part, the willingness of workers to remain voluntarily unemployed rather than take unattractive or lower-paying jobs. 
D)  reflects the fact that people are lazy and will not work unless they have to. 
E)  denotes workers temporarily unemployed as a result of expansionary monetary and fiscal policies.

Question 5

The Phillips curve illustrates the relationship between

Accepted Answer

A)  the interest rate and the money supply. 
B)  the interest rate and the level of investment. 
C)  aggregate demand and aggregate supply. 
D)  output and income. 
E)  inflation and unemployment. 
A)  the interest rate and the money supply. 
B)  the interest rate and the level of investment. 
C)  aggregate demand and aggregate supply. 
D)  output and income. 
E)  inflation and unemployment.

Question 6

When monetary authorities accommodate or validate supply-side inflation,they

Accepted Answer

A)  increase the money supply sufficiently to prevent significant increases in unemployment. 
B)  pursue tight money policies to ensure matching increases in interest rates. 
C)  ensure that aggregate demand shifts to the left. 
D)  reduce the price level by an amount equal to the rate of inflation. 
E)  rely on large budget surpluses to offset their open market purchases. 
A)  increase the money supply sufficiently to prevent significant increases in unemployment. 
B)  pursue tight money policies to ensure matching increases in interest rates. 
C)  ensure that aggregate demand shifts to the left. 
D)  reduce the price level by an amount equal to the rate of inflation. 
E)  rely on large budget surpluses to offset their open market purchases.

Question 7

Incomes policies are another name for

Accepted Answer

A)  the Employment Act of 1946. 
B)  functional finance. 
C)  welfare programs. 
D)  wage and price guidelines and/or controls. 
E)  a full-employment budget. 
A)  the Employment Act of 1946. 
B)  functional finance. 
C)  welfare programs. 
D)  wage and price guidelines and/or controls. 
E)  a full-employment budget.

Question 8

The following question are based on the following graph, which shows two different Phillips curves, labeled (1) and (2):
  
-Phillips curve (2)could shift up to curve (1)as a result of

Accepted Answer

A)  the decreased bargaining power of unions. 
B)  expectations of a higher rate of inflation. 
C)  a higher level of training of the labor force. 
D)  increased labor productivity. 
E)  decreased government spending. 
A)  the decreased bargaining power of unions. 
B)  expectations of a higher rate of inflation. 
C)  a higher level of training of the labor force. 
D)  increased labor productivity. 
E)  decreased government spending.

Question 9

A leftward shift in the aggregate supply curve produces

Accepted Answer

A)  demand-side inflation. 
B)  increases in the price level. 
C)  falling interest rates. 
D)  a higher standard of living. 
E)  a horizontal Phillips curve. 
A)  demand-side inflation. 
B)  increases in the price level. 
C)  falling interest rates. 
D)  a higher standard of living. 
E)  a horizontal Phillips curve.

Question 10

Wage and price controls and incomes policies are

Accepted Answer

A)  techniques used to increase aggregate demand without increasing aggregate supply. 
B)  methods used by government to try to reduce inflation without increasing unemployment. 
C)  examples of discretionary monetary policies. 
D)  currently in effect in the U.S. economy. 
E)  key elements of President Roosevelt's New Deal. 
A)  techniques used to increase aggregate demand without increasing aggregate supply. 
B)  methods used by government to try to reduce inflation without increasing unemployment. 
C)  examples of discretionary monetary policies. 
D)  currently in effect in the U.S. economy. 
E)  key elements of President Roosevelt's New Deal.

Question 11

The Phillips curve for the 1970s,compared to that for the 1950s and 1960s

Accepted Answer

A)  revealed a lower (3 percent) natural rate of unemployment. 
B)  was shifted downward to the left and appeared more nearly horizontal. 
C)  was a more predictable phenomenon and guide to policy formation. 
D)  resulted from a rightward shift in aggregate supply. 
E)  indicated the presence of strong inflationary expectations. 
A)  revealed a lower (3 percent) natural rate of unemployment. 
B)  was shifted downward to the left and appeared more nearly horizontal. 
C)  was a more predictable phenomenon and guide to policy formation. 
D)  resulted from a rightward shift in aggregate supply. 
E)  indicated the presence of strong inflationary expectations.

Question 12

The main reason the government relied on a restrictive monetary policy to fight inflation during the late 1970s was that

Accepted Answer

A)  such a policy was strongly urged during the 1974 economic summit conference called by President Ford. 
B)  such a policy is the only proven method for fighting inflation and unemployment at the same time. 
C)  unemployment was then viewed as a more serious problem than inflation, and such a policy could boost employment. 
D)  most observers during that time felt that inflation was due to excessive demand, not shortages. 
E)  the resulting increase in interest rates would stimulate investment and expanded output. 
A)  such a policy was strongly urged during the 1974 economic summit conference called by President Ford. 
B)  such a policy is the only proven method for fighting inflation and unemployment at the same time. 
C)  unemployment was then viewed as a more serious problem than inflation, and such a policy could boost employment. 
D)  most observers during that time felt that inflation was due to excessive demand, not shortages. 
E)  the resulting increase in interest rates would stimulate investment and expanded output.

Question 13

Which of the following strategies did the government generally call on to enforce its incomes policies in the 1960s?

Accepted Answer

A)  government contracts to those who cooperated 
B)  tax penalties for noncompliance 
C)  fines 
D)  criminal charges 
E)  antitrust action by the Department of Justice 
A)  government contracts to those who cooperated 
B)  tax penalties for noncompliance 
C)  fines 
D)  criminal charges 
E)  antitrust action by the Department of Justice

Question 14

The basic assertion of those who argue that the long-run Phillips curve is vertical is that

Accepted Answer

A)  both unemployment and price stability can be achieved through proper discretionary monetary and fiscal policies. 
B)  over the long run, the Phillips curve is useful for making economic policy tradeoffs between inflation and unemployment. 
C)  inflation is caused by cost-push forces and can be reduced only by wage and price controls. 
D)  expansionary monetary and fiscal policies improve the rate of unemployment only temporarily because they also change inflationary expectations. 
E)  the natural rate of unemployment will fall to zero over time. 
A)  both unemployment and price stability can be achieved through proper discretionary monetary and fiscal policies. 
B)  over the long run, the Phillips curve is useful for making economic policy tradeoffs between inflation and unemployment. 
C)  inflation is caused by cost-push forces and can be reduced only by wage and price controls. 
D)  expansionary monetary and fiscal policies improve the rate of unemployment only temporarily because they also change inflationary expectations. 
E)  the natural rate of unemployment will fall to zero over time.

Question 15

The New Economy of the 1990s was characterized by

Accepted Answer

A) productivity increases and the globalization of business, which shifted the aggregate supply curve to the right 
B)  unemployment rates that rose rapidly because businesses outsourced production to low-wage countries 
C)  inflationary rates that rose steadily to more than 4.5 percent per year because of the Fed's easy-money policies. 
D)  large declines in aggregate demand that led to concerns by policy makers that deflation was becoming a major threat. 
E)  increases in budget deficits that were used to finance large government expenditures on research and development. 
A) productivity increases and the globalization of business, which shifted the aggregate supply curve to the right 
B)  unemployment rates that rose rapidly because businesses outsourced production to low-wage countries 
C)  inflationary rates that rose steadily to more than 4.5 percent per year because of the Fed's easy-money policies. 
D)  large declines in aggregate demand that led to concerns by policy makers that deflation was becoming a major threat. 
E)  increases in budget deficits that were used to finance large government expenditures on research and development.

Question 16

The idea that,in the long run,the rate of unemployment is NOT related to the rate of inflation is based on the concept of the

Accepted Answer

A)  multiplier. 
B)  division of labor. 
C)  law of one price. 
D)  backward-bending supply curve of labor. 
E)  natural rate of unemployment. 
A)  multiplier. 
B)  division of labor. 
C)  law of one price. 
D)  backward-bending supply curve of labor. 
E)  natural rate of unemployment.

Question 17

Higher than expected rates of inflation cause the short-run Phillips curve to

Accepted Answer

A)  equal the aggregate demand curve. 
B)  become horizontal. 
C)  remain stable. 
D)  shift further upward and out from the origin. 
E)  reflect the fact that, in the long run, the actual rate of unemployment remains below the natural rate of unemployment. 
A)  equal the aggregate demand curve. 
B)  become horizontal. 
C)  remain stable. 
D)  shift further upward and out from the origin. 
E)  reflect the fact that, in the long run, the actual rate of unemployment remains below the natural rate of unemployment.

Question 18

The following question are based on the following graph, which shows two different Phillips curves, labeled (1) and (2):
  
-Phillips curves (1)and (2)are examples of ________ Phillips curves.

Accepted Answer

A)  equilibrium 
B)  accelerated 
C)  natural 
D)  short-run 
E)  substandard 
A)  equilibrium 
B)  accelerated 
C)  natural 
D)  short-run 
E)  substandard

Question 19

Significant changes in the price of major raw materials such as oil or agricultural goods are often referred to as

Accepted Answer

A)  price ceilings. 
B)  supply shocks. 
C)  menu costs. 
D)  barometric spirals. 
E)  externalities. 
A)  price ceilings. 
B)  supply shocks. 
C)  menu costs. 
D)  barometric spirals. 
E)  externalities.

Question 20

In part,the wage-price spiral

Accepted Answer

A)  is at the heart of demand-pull inflation. 
B)  is an example of too much money chasing too few goods. 
C)  is an outgrowth of a perfectly competitive market structure. 
D)  occurs when labor productivity rises faster than wage rates. 
E)  results from the presence of significant market power in the hands of firms and their workers. 
A)  is at the heart of demand-pull inflation. 
B)  is an example of too much money chasing too few goods. 
C)  is an outgrowth of a perfectly competitive market structure. 
D)  occurs when labor productivity rises faster than wage rates. 
E)  results from the presence of significant market power in the hands of firms and their workers.

Exam 22: Supply Shocks and Inflation

Wage and price controls have been proposed primarily as a means for dealing with

Which of the following best describes the overall economic impact of the food and energy supply shocks in the 1970s?

If individuals' expectations are formed adaptively

The concept of the natural rate of unemployment

The Phillips curve illustrates the relationship between

When monetary authorities accommodate or validate supply-side inflation,they

Incomes policies are another name for

The following question are based on the following graph, which shows two different Phillips curves, labeled (1) and (2): -Phillips curve (2)could shift up to curve (1)as a result of

A leftward shift in the aggregate supply curve produces

Wage and price controls and incomes policies are

The Phillips curve for the 1970s,compared to that for the 1950s and 1960s

The main reason the government relied on a restrictive monetary policy to fight inflation during the late 1970s was that

Which of the following strategies did the government generally call on to enforce its incomes policies in the 1960s?

The basic assertion of those who argue that the long-run Phillips curve is vertical is that

The New Economy of the 1990s was characterized by

The idea that,in the long run,the rate of unemployment is NOT related to the rate of inflation is based on the concept of the

Higher than expected rates of inflation cause the short-run Phillips curve to

The following question are based on the following graph, which shows two different Phillips curves, labeled (1) and (2): -Phillips curves (1)and (2)are examples of ________ Phillips curves.

Significant changes in the price of major raw materials such as oil or agricultural goods are often referred to as

In part,the wage-price spiral

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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