Question 1

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Accepted Answer

A) Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation). 
B) Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation). 
C) Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation). 
D) Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment). 
A) Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation). 
B) Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation). 
C) Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation). 
D) Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment).

Question 2

Milton Friedman argued that the Fed's control over the money supply could be used to peg

Accepted Answer

A) the level or growth rate of a nominal variable, but not the level or growth rate of a real variable. 
B) the level of a nominal or real variable, but not the growth rate of a real or nominal variable. 
C) the level or growth rate of a real variable, but not the level or growth rate of a nominal variable. 
D) both levels and growth rates of both real and nominal variables. 
A) the level or growth rate of a nominal variable, but not the level or growth rate of a real variable. 
B) the level of a nominal or real variable, but not the growth rate of a real or nominal variable. 
C) the level or growth rate of a real variable, but not the level or growth rate of a nominal variable. 
D) both levels and growth rates of both real and nominal variables.

Question 3

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 4

If the long-run Phillips curve shifts to the left,for any given rate of money growth and inflation the economy will have

Accepted Answer

A) higher unemployment and lower output. 
B) higher unemployment and higher output. 
C) lower unemployment and lower output. 
D) lower unemployment and higher output. 
A) higher unemployment and lower output. 
B) higher unemployment and higher output. 
C) lower unemployment and lower output. 
D) lower unemployment and higher output.

Question 5

Unemployment would decrease and prices increase if

Accepted Answer

A) aggregate demand shifted right. 
B) aggregate demand shifted left. 
C) aggregate supply shifted right. 
D) aggregate supply shifted left. 
A) aggregate demand shifted right. 
B) aggregate demand shifted left. 
C) aggregate supply shifted right. 
D) aggregate supply shifted left.

Question 6

In responding to the Phillips curve hypothesis,Friedman argued that the Fed can peg the

Accepted Answer

A) unemployment rate. 
B) inflation rate. 
C) growth rate of real national income. 
D) All of the above are correct. 
A) unemployment rate. 
B) inflation rate. 
C) growth rate of real national income. 
D) All of the above are correct.

Question 7

If inflation expectations decline,than the short-run Phillips curve shifts

Accepted Answer

A) left, meaning that at any given inflation rate unemployment will be lower in the short run than before. 
B) right, meaning that at any given inflation rate unemployment will be lower in the short run than before. 
C) right, meaning that at any given inflation rate unemployment will be higher in the short run than before. 
D) left, meaning that at any given inflation rate unemployment will be higher in the short run than before. 
A) left, meaning that at any given inflation rate unemployment will be lower in the short run than before. 
B) right, meaning that at any given inflation rate unemployment will be lower in the short run than before. 
C) right, meaning that at any given inflation rate unemployment will be higher in the short run than before. 
D) left, meaning that at any given inflation rate unemployment will be higher in the short run than before.

Question 8

Use the graph below to answer the following questions.
Figure 35-2
  
-Refer to Figure 35-2.The money supply growth rate is greatest at

Accepted Answer

A) a. 
B) b. 
C) c. 
D) e. 
A) a. 
B) b. 
C) c. 
D) e.

Question 9

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Accepted Answer

A) True 
 B)False

Question 10

The vertical long-run Phillips curve is inconsistent with monetary neutrality implied by the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 11

Disinflation would cause

Accepted Answer

A) the short-run and the long run Phillips curve to shift right. 
B) the short-run and the long run Phillips curve to shift left. 
C) the short-run Phillips curve but not the long run Phillips curve to shift right. 
D) the short-run Phillips curve but not the long run Phillips curve to shift left. 
A) the short-run and the long run Phillips curve to shift right. 
B) the short-run and the long run Phillips curve to shift left. 
C) the short-run Phillips curve but not the long run Phillips curve to shift right. 
D) the short-run Phillips curve but not the long run Phillips curve to shift left.

Question 12

Suppose that a central bank increases the money supply.According to the logic of the Phillips curve this should make

Accepted Answer

A) prices, output, and employment rise. 
B) prices and output rise, employment fall. 
C) prices rise and output and employment fall. 
D) prices fall, output, and employment rise. 
A) prices, output, and employment rise. 
B) prices and output rise, employment fall. 
C) prices rise and output and employment fall. 
D) prices fall, output, and employment rise.

Question 13

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Accepted Answer

A) the short-run and long-run Phillips curves left. 
B) the short-run and long-run Phillips curves right. 
C) only the short-run Phillips curve left. 
D) only the short-run Phillips curve right. 
A) the short-run and long-run Phillips curves left. 
B) the short-run and long-run Phillips curves right. 
C) only the short-run Phillips curve left. 
D) only the short-run Phillips curve right.

Question 14

In the long run,the inflation rate depends primarily on

Accepted Answer

A) the ability of unions to raise wages. 
B) government spending. 
C) the money supply growth rate. 
D) the monopoly power of firms. 
A) the ability of unions to raise wages. 
B) government spending. 
C) the money supply growth rate. 
D) the monopoly power of firms.

Question 15

Suppose the Fed decreased the growth rate of the money supply.Which of the following would be lower in the long run?

Accepted Answer

A) both the natural rate of unemployment and the inflation rate 
B) the natural rate of unemployment, but not the inflation rate 
C) the inflation rate, but not the natural rate of unemployment 
D) neither the natural unemployment rate nor the inflation rate 
A) both the natural rate of unemployment and the inflation rate 
B) the natural rate of unemployment, but not the inflation rate 
C) the inflation rate, but not the natural rate of unemployment 
D) neither the natural unemployment rate nor the inflation rate

Question 16

In 1979 when the Fed was deciding how aggressively to fight inflation,the typical estimate of the sacrifice ratio was

Accepted Answer

A) 1. 
B) 5. 
C) 7. 
D) 10. 
A) 1. 
B) 5. 
C) 7. 
D) 10.

Question 17

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Accepted Answer

Both reflect the classical dichotomy.The

Question 18

Faced with an adverse supply shock,policymakers can increase

Accepted Answer

A) aggregate demand, which increases prices and output. 
B) aggregate demand, which decreases prices and increases output. 
C) aggregate supply, which increases prices and output. 
D) aggregate supply, which decreases prices and increases output. 
A) aggregate demand, which increases prices and output. 
B) aggregate demand, which decreases prices and increases output. 
C) aggregate supply, which increases prices and output. 
D) aggregate supply, which decreases prices and increases output.

Question 19

Suppose that money supply growth increases.In the long run,this increases employment according to

Accepted Answer

A) both the long-run Phillips curve and the aggregate demand and aggregate supply model 
B) neither the long-run Phillips curve nor the aggregate demand and aggregate supply model 
C) the long-run Phillips curve, but not the long-run aggregate supply curve 
D) the long-run aggregate supply curve, but not the long-run Phillips curve 
A) both the long-run Phillips curve and the aggregate demand and aggregate supply model 
B) neither the long-run Phillips curve nor the aggregate demand and aggregate supply model 
C) the long-run Phillips curve, but not the long-run aggregate supply curve 
D) the long-run aggregate supply curve, but not the long-run Phillips curve

Question 20

Which of the following is correct concerning the long-run Phillips curve?

Accepted Answer

A) Its position is determined primarily by monetary factors. 
B) If it shifts right, long-run aggregate supply shifts right. 
C) It cannot be changed by any government policy. 
D) Its position depends on the natural rate of unemployment. 
A) Its position is determined primarily by monetary factors. 
B) If it shifts right, long-run aggregate supply shifts right. 
C) It cannot be changed by any government policy. 
D) Its position depends on the natural rate of unemployment.

Exam 35: The Short Run Trade Off Between Inflation and Unemployment

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Milton Friedman argued that the Fed's control over the money supply could be used to peg

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

If the long-run Phillips curve shifts to the left,for any given rate of money growth and inflation the economy will have

Unemployment would decrease and prices increase if

In responding to the Phillips curve hypothesis,Friedman argued that the Fed can peg the

If inflation expectations decline,than the short-run Phillips curve shifts

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.The money supply growth rate is greatest at

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

The vertical long-run Phillips curve is inconsistent with monetary neutrality implied by the classical dichotomy.

Disinflation would cause

Suppose that a central bank increases the money supply.According to the logic of the Phillips curve this should make

The long-run response to an increase in the growth rate of the money supply is shown by shifting

In the long run,the inflation rate depends primarily on

Suppose the Fed decreased the growth rate of the money supply.Which of the following would be lower in the long run?

In 1979 when the Fed was deciding how aggressively to fight inflation,the typical estimate of the sacrifice ratio was

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Faced with an adverse supply shock,policymakers can increase

Suppose that money supply growth increases.In the long run,this increases employment according to

Which of the following is correct concerning the long-run Phillips curve?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Five Debates Over Macroeconomic Policy

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