Question 1

If policymakers decrease aggregate demand,then in the long run

Accepted Answer

A) prices will be lower and unemployment will be higher. 
B) prices will be lower and unemployment will be unchanged. 
C) inflation and unemployment will be unchanged. 
D) None of the above is correct. 
A) prices will be lower and unemployment will be higher. 
B) prices will be lower and unemployment will be unchanged. 
C) inflation and unemployment will be unchanged. 
D) None of the above is correct.

Question 2

During 1999 and 2000 the Federal Open Market Committee of the Federal Reserve System noted that productivity increases had caused aggregate supply to shift to the right.Other things the same,this should have

Accepted Answer

A) shifted the short-run Phillips curve to the left.So, by increasing the money supply the Fed could have reduced unemployment further while returning inflation to its former level. 
B) shifted the short-run Phillips curve to the left.So, by increasing the money supply the Fed could have reduced unemployment further only by raising the inflation rate above its former level. 
C) shifted the short-run Phillips curve to the right.So, by increasing the money supply the Fed could have reduced unemployment further while returning inflation to its former level. 
D) None of the above is correct. 
A) shifted the short-run Phillips curve to the left.So, by increasing the money supply the Fed could have reduced unemployment further while returning inflation to its former level. 
B) shifted the short-run Phillips curve to the left.So, by increasing the money supply the Fed could have reduced unemployment further only by raising the inflation rate above its former level. 
C) shifted the short-run Phillips curve to the right.So, by increasing the money supply the Fed could have reduced unemployment further while returning inflation to its former level. 
D) None of the above is correct.

Question 3

In the mid and late 1990s,

Accepted Answer

A) aggregate supply and the Phillips curve shifted right 
B) aggregate supply and the Phillips curve shifted left. 
C) aggregate supply shifted right and the Phillips curve shifted left. 
D) aggregate supply shifted left and the Phillips curve shifted right. 
A) aggregate supply and the Phillips curve shifted right 
B) aggregate supply and the Phillips curve shifted left. 
C) aggregate supply shifted right and the Phillips curve shifted left. 
D) aggregate supply shifted left and the Phillips curve shifted right.

Question 4

In the long run,an increase in the money supply

Accepted Answer

A) leaves prices and unemployment unchanged. 
B) raises prices and unemployment. 
C) raises prices and leaves unemployment unchanged. 
D) leaves prices unchanged and reduces unemployment. 
A) leaves prices and unemployment unchanged. 
B) raises prices and unemployment. 
C) raises prices and leaves unemployment unchanged. 
D) leaves prices unchanged and reduces unemployment.

Question 5

Most economists believe that a tradeoff between inflation and unemployment exists

Accepted Answer

A) only in the short run. 
B) only in the long run. 
C) in both the short and long run. 
D) in neither the short nor long run. 
A) only in the short run. 
B) only in the long run. 
C) in both the short and long run. 
D) in neither the short nor long run.

Question 6

In the long run,people come to expect whatever inflation rate the Fed chooses to produce,so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 7

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Accepted Answer

A) the inflation rate decreases. 
B) the government increases its expenditures. 
C) the Fed decreases the money supply. 
D) None of the above is correct. 
A) the inflation rate decreases. 
B) the government increases its expenditures. 
C) the Fed decreases the money supply. 
D) None of the above is correct.

Question 8

Friedman and Phelps argued that

Accepted Answer

A) if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. 
B) if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C) any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D) None of the above is correct. 
A) if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. 
B) if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C) any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D) None of the above is correct.

Question 9

If the minimum wage increased,then at any given rate of inflation

Accepted Answer

A) both output and employment would be higher. 
B) neither output nor employment would be higher. 
C) output would be higher and unemployment would be lower. 
D) output would be lower and unemployment would be higher. 
A) both output and employment would be higher. 
B) neither output nor employment would be higher. 
C) output would be higher and unemployment would be lower. 
D) output would be lower and unemployment would be higher.

Question 10

According to Phelps and Friedman,in the short run,an increase in the money supply

Accepted Answer

A) raises prices and unemployment. 
B) raises prices and reduces unemployment. 
C) reduces prices and raises unemployment. 
D) None of the above is correct. 
A) raises prices and unemployment. 
B) raises prices and reduces unemployment. 
C) reduces prices and raises unemployment. 
D) None of the above is correct.

Question 11

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Accepted Answer

A) Bureau of the Budget. 
B) Bureau of Labor Statistics. 
C) Department of the Treasury. 
D) President's Council of Economic Advisors. 
A) Bureau of the Budget. 
B) Bureau of Labor Statistics. 
C) Department of the Treasury. 
D) President's Council of Economic Advisors.

Question 12

Use the two graphs in the diagram to answer the following questions.
Figure 35-3
  
-Refer to Figure 35-3.The economy would move from c to b

Accepted Answer

A) in the short run if money supply growth increased unexpectedly. 
B) in the short run if money supply growth decreased unexpectedly. 
C) in the long run if money supply growth increases. 
D) in the long run if money supply growth decreases. 
A) in the short run if money supply growth increased unexpectedly. 
B) in the short run if money supply growth decreased unexpectedly. 
C) in the long run if money supply growth increases. 
D) in the long run if money supply growth decreases.

Question 13

A central bank sets out to reduce unemployment by changing the money supply growth rate.The long-run Phillips curve shows that in comparison to their original rates that this policy will eventually lead to

Accepted Answer

A) an increase in both the inflation rate and the unemployment rate. 
B) an increase in the inflation rate and a reduction in the unemployment rate. 
C) no change in either the inflation rate or the unemployment rate. 
D) an increase in the inflation rate and no reduction in the unemployment rate. 
A) an increase in both the inflation rate and the unemployment rate. 
B) an increase in the inflation rate and a reduction in the unemployment rate. 
C) no change in either the inflation rate or the unemployment rate. 
D) an increase in the inflation rate and no reduction in the unemployment rate.

Question 14

Which of the following would shift the long-run Phillips curve right?

Accepted Answer

A) expansionary fiscal policy. 
B) an increase in the inflation rate. 
C) increases in unemployment compensation. 
D) None of the above is correct. 
A) expansionary fiscal policy. 
B) an increase in the inflation rate. 
C) increases in unemployment compensation. 
D) None of the above is correct.

Question 15

Other things the same,a country that decides to reduce inflation will

Accepted Answer

A) have a higher unemployment rate in the short run and the long run. 
B) have a higher unemployment rate only in the long run. 
C) have a higher unemployment rate only in the short run. 
D) not have a higher unemployment rate in either the short run or the long run. 
A) have a higher unemployment rate in the short run and the long run. 
B) have a higher unemployment rate only in the long run. 
C) have a higher unemployment rate only in the short run. 
D) not have a higher unemployment rate in either the short run or the long run.

Question 16

Proponents of rational expectations argue that failing to account for peoples' revised expectations led to estimates of the sacrifice ratio that were too high.

Accepted Answer

A) True 
 B)False

Question 17

On a given short-run Phillips curve which of the following is held constant?

Accepted Answer

A) the level of GDP 
B) actual inflation 
C) expected inflation 
D) employment 
A) the level of GDP 
B) actual inflation 
C) expected inflation 
D) employment

Question 18

Which of the following is disinflation?

Accepted Answer

A) prices stay the same. 
B) prices fall. 
C) prices rise at a slower rate than they used to. 
D) prices rise as a faster rate than they used to. 
A) prices stay the same. 
B) prices fall. 
C) prices rise at a slower rate than they used to. 
D) prices rise as a faster rate than they used to.

Question 19

Some economists argue that simply and suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work.For example,if a government cuts money growth but makes no real fiscal reforms,people will expect the government will eventually need to expand the money supply to pay for its expenditures.Thus,the promise to fight inflation will not be credible.Explain why credibility is important to a reduction in the inflation rate.

Accepted Answer

If people believe that the government re

Question 20

In 1968,economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Accepted Answer

A) it seemed to work for wages but not for inflation. 
B) monetary policy was ineffective in combating inflation. 
C) the Phillips curve did not apply in the long run. 
D) Phillips had made errors in collecting his data. 
A) it seemed to work for wages but not for inflation. 
B) monetary policy was ineffective in combating inflation. 
C) the Phillips curve did not apply in the long run. 
D) Phillips had made errors in collecting his data.

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

If policymakers decrease aggregate demand,then in the long run

During 1999 and 2000 the Federal Open Market Committee of the Federal Reserve System noted that productivity increases had caused aggregate supply to shift to the right.Other things the same,this should have

In the mid and late 1990s,

In the long run,an increase in the money supply

Most economists believe that a tradeoff between inflation and unemployment exists

In the long run,people come to expect whatever inflation rate the Fed chooses to produce,so unemployment returns to its natural rate.

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Friedman and Phelps argued that

If the minimum wage increased,then at any given rate of inflation

According to Phelps and Friedman,in the short run,an increase in the money supply

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.The economy would move from c to b

A central bank sets out to reduce unemployment by changing the money supply growth rate.The long-run Phillips curve shows that in comparison to their original rates that this policy will eventually lead to

Which of the following would shift the long-run Phillips curve right?

Other things the same,a country that decides to reduce inflation will

Proponents of rational expectations argue that failing to account for peoples' revised expectations led to estimates of the sacrifice ratio that were too high.

On a given short-run Phillips curve which of the following is held constant?

Which of the following is disinflation?

In 1968,economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

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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