Question 1

In the 1970s,the Fed accommodated a(n)

Accepted Answer

A) adverse supply shock and so contributed to higher inflation. 
B) adverse supply shock and so contributed to lower inflation. 
C) favorable supply shock and so contributed to higher inflation. 
D) favorable supply shock and so contributed to lower inflation. 
A) adverse supply shock and so contributed to higher inflation. 
B) adverse supply shock and so contributed to lower inflation. 
C) favorable supply shock and so contributed to higher inflation. 
D) favorable supply shock and so contributed to lower inflation.

Question 2

Compared to the 1970s,the U.S.short-run Phillips curve in recent years has been

Accepted Answer

A) further right, as inflation expectations have risen. 
B) further right, as inflation expectations have fallen. 
C) further left, as inflation expectations have risen. 
D) further left, as inflation expectations have fallen. 
A) further right, as inflation expectations have risen. 
B) further right, as inflation expectations have fallen. 
C) further left, as inflation expectations have risen. 
D) further left, as inflation expectations have fallen.

Question 3

In Fall of 2004 the unemployment rate was about 5.4% and the inflation rate was about 2.5%.Compared to other points of the Greenspan era

Accepted Answer

A) The inflation rate and unemployment rate were much higher than their averages. 
B) The inflation rate and unemployment rate were much lower than their averages. 
C) The unemployment rate was much higher and the inflation rate was much lower than their averages. 
D) The unemployment rate and the inflation rate were not too far from their averages. 
A) The inflation rate and unemployment rate were much higher than their averages. 
B) The inflation rate and unemployment rate were much lower than their averages. 
C) The unemployment rate was much higher and the inflation rate was much lower than their averages. 
D) The unemployment rate and the inflation rate were not too far from their averages.

Question 4

If the short-run Phillips curve were stable,which of the following would be unusual?

Accepted Answer

A) an increase in government spending and a fall in unemployment 
B) an increase in inflation and a decrease in output 
C) a decrease in the inflation rate and a rise in the unemployment rate 
D) a decrease in the money supply and a rise in unemployment. 
A) an increase in government spending and a fall in unemployment 
B) an increase in inflation and a decrease in output 
C) a decrease in the inflation rate and a rise in the unemployment rate 
D) a decrease in the money supply and a rise in unemployment.

Question 5

If the long-run Phillips curve shifts to the right,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 6

The economy is in long-run equilibrium when Senator Mefirst argues that the Fed should do more to fight unemployment.He argues that if the Fed increased the money supply faster,more workers would find jobs.The Senator's argument

Accepted Answer

A) is completely correct. 
B) is completely wrong. 
C) is true for the short run but not the long run. 
D) is true for the long run but not the short run. 
A) is completely correct. 
B) is completely wrong. 
C) is true for the short run but not the long run. 
D) is true for the long run but not the short run.

Question 7

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 6 percent would require sacrificing

Accepted Answer

A) 2 percent of annual output. 
B) 5 percent of annual output. 
C) 6 percent of annual output. 
D) None of the above is correct. 
A) 2 percent of annual output. 
B) 5 percent of annual output. 
C) 6 percent of annual output. 
D) None of the above is correct.

Question 8

The theory by which people optimally use all available information when forecasting the future is known as

Accepted Answer

A) rational expectations. 
B) perfect expectations. 
C) credible expectations. 
D) predictive expectations. 
A) rational expectations. 
B) perfect expectations. 
C) credible expectations. 
D) predictive expectations.

Question 9

If in response to an adverse aggregate supply shock the Fed increased the money supply,

Accepted Answer

A) unemployment and inflation would both rise. 
B) unemployment and inflation would both fall. 
C) unemployment would rise and inflation would fall. 
D) unemployment would fall and inflation would rise. 
A) unemployment and inflation would both rise. 
B) unemployment and inflation would both fall. 
C) unemployment would rise and inflation would fall. 
D) unemployment would fall and inflation would rise.

Question 10

In the long run,the natural rate of unemployment depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 11

Policymakers

Accepted Answer

A) can not exploit a tradeoff between inflation and unemployment in either the short or long run. 
B) can exploit a tradeoff between inflation and unemployment in the short run but not in the long run. 
C) can exploit a tradeoff between inflation and unemployment in both the short run and the long run. 
D) can exploit a tradeoff between inflation and unemployment in the long run, but not the short run. 
A) can not exploit a tradeoff between inflation and unemployment in either the short or long run. 
B) can exploit a tradeoff between inflation and unemployment in the short run but not in the long run. 
C) can exploit a tradeoff between inflation and unemployment in both the short run and the long run. 
D) can exploit a tradeoff between inflation and unemployment in the long run, but not the short run.

Question 12

A favorable supply shock will cause inflation to

Accepted Answer

A) rise and shift the short-run Phillips curve right. 
B) rise and shift the short-run Phillips curve left. 
C) fall and shift the short-run Phillips curve right. 
D) fall and shift the short-run Phillips curve left. 
A) rise and shift the short-run Phillips curve right. 
B) rise and shift the short-run Phillips curve left. 
C) fall and shift the short-run Phillips curve right. 
D) fall and shift the short-run Phillips curve left.

Question 13

More flexible labor markets will shift

Accepted Answer

A) both the long-run Phillips curve and the long-run aggregate supply curve to the right. 
B) both the long-run Phillips curve and the long-run aggregate supply curve to the left. 
C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. 
D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right. 
A) both the long-run Phillips curve and the long-run aggregate supply curve to the right. 
B) both the long-run Phillips curve and the long-run aggregate supply curve to the left. 
C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. 
D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right.

Question 14

If policymakers increase aggregate demand,the price level

Accepted Answer

A) falls, but unemployment rises. 
B) and unemployment fall. 
C) and unemployment rise. 
D) rises, but unemployment falls. 
A) falls, but unemployment rises. 
B) and unemployment fall. 
C) and unemployment rise. 
D) rises, but unemployment falls.

Question 15

An adverse supply shock will cause inflation to

Accepted Answer

A) rise and the short-run Phillips curve to shift right. 
B) rise and the short-run Phillips curve to shift left. 
C) fall and the short-run Phillips curve to shift right. 
D) fall and the short-run Phillips curve to shift left. 
A) rise and the short-run Phillips curve to shift right. 
B) rise and the short-run Phillips curve to shift left. 
C) fall and the short-run Phillips curve to shift right. 
D) fall and the short-run Phillips curve to shift left.

Question 16

Suppose that the Fed unexpectedly pursues contractionary monetary policy.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Accepted Answer

In the short run,unemployment will rise,

Question 17

In the long run,a decrease in the money supply growth rate

Accepted Answer

A) increases inflation and shifts the short-run Phillips curve right. 
B) increases inflation and shifts the short-run Phillips curve left. 
C) decreases inflation and shifts the short-run Philips curve right. 
D) decreases inflation and shifts the short-run Phillips curve left. 
A) increases inflation and shifts the short-run Phillips curve right. 
B) increases inflation and shifts the short-run Phillips curve left. 
C) decreases inflation and shifts the short-run Philips curve right. 
D) decreases inflation and shifts the short-run Phillips curve left.

Question 18

Monetary Policy in Hyperion
In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Hyperion.Suppose that the Hyperion Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Hyperions believe their government then which,if any,curve(s)shift right?

Accepted Answer

A) the short-run and the long-run Phillips curve 
B) the short-run but not the long run Phillips curve 
C) the long-run but not the short-run Phillips curve 
D) neither the short-run nor the long-run Phillips curve 
A) the short-run and the long-run Phillips curve 
B) the short-run but not the long run Phillips curve 
C) the long-run but not the short-run Phillips curve 
D) neither the short-run nor the long-run Phillips curve

Question 19

According to classical macroeconomic theory,in the long run

Accepted Answer

A) monetary growth affects both real and nominal variables. 
B) the only real variable affected by monetary growth is the unemployment rate. 
C) a number of factors that affect unemployment are influenced by monetary growth. 
D) monetary growth affects nominal but not real variables. 
A) monetary growth affects both real and nominal variables. 
B) the only real variable affected by monetary growth is the unemployment rate. 
C) a number of factors that affect unemployment are influenced by monetary growth. 
D) monetary growth affects nominal but not real variables.

Question 20

Which of the following would not be associated with an adverse supply shock?

Accepted Answer

A) the short-run Phillips curve shifts left 
B) unemployment rises 
C) the price level rises 
D) output falls 
A) the short-run Phillips curve shifts left 
B) unemployment rises 
C) the price level rises 
D) output falls

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

In the 1970s,the Fed accommodated a(n)

Compared to the 1970s,the U.S.short-run Phillips curve in recent years has been

In Fall of 2004 the unemployment rate was about 5.4% and the inflation rate was about 2.5%.Compared to other points of the Greenspan era

If the short-run Phillips curve were stable,which of the following would be unusual?

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

The economy is in long-run equilibrium when Senator Mefirst argues that the Fed should do more to fight unemployment.He argues that if the Fed increased the money supply faster,more workers would find jobs.The Senator's argument

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 6 percent would require sacrificing

The theory by which people optimally use all available information when forecasting the future is known as

If in response to an adverse aggregate supply shock the Fed increased the money supply,

In the long run,the natural rate of unemployment depends primarily on the growth rate of the money supply.

Policymakers

A favorable supply shock will cause inflation to

More flexible labor markets will shift

If policymakers increase aggregate demand,the price level

An adverse supply shock will cause inflation to

Suppose that the Fed unexpectedly pursues contractionary monetary policy.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

In the long run,a decrease in the money supply growth rate

According to classical macroeconomic theory,in the long run

Which of the following would not be associated with an adverse supply shock?

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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