Question 1

The natural rate of unemployment

Accepted Answer

A) is constant over time. 
B) varies over time, but can't be changed by the government. 
C) is the unemployment rate that the economy tends to move to in the long run. 
D) depends on the rate at which the Fed increases the money supply. 
A) is constant over time. 
B) varies over time, but can't be changed by the government. 
C) is the unemployment rate that the economy tends to move to in the long run. 
D) depends on the rate at which the Fed increases the money supply.

Question 2

Use the pair of diagrams below to answer the following questions.
Figure 35-1
  
-Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Accepted Answer

A) a and 1. 
B) b and 2. 
C) c and 3. 
D) None of the above is correct. 
A) a and 1. 
B) b and 2. 
C) c and 3. 
D) None of the above is correct.

Question 3

Use the two graphs in the diagram to answer the following questions.
Figure 35-3
  
-Refer to Figure 35-3.Starting from c and 3,in the short run an unexpected increase in money supply growth moves the economy to

Accepted Answer

A) a and 1. 
B) b and 2. 
C) back to c and 3. 
D) d and 4. 
A) a and 1. 
B) b and 2. 
C) back to c and 3. 
D) d and 4.

Question 4

Friedman and Phelps concluded that

Accepted Answer

A) in the long run the Phillips curve is downward sloping which is consistent with classical theory. 
B) in the long run the Philips curve is downward sloping which is inconsistent with classical theory. 
C) in the long run the Phillips curve is vertical which is consistent with classical theory. 
D) in the long run the Phillips curve is vertical which is inconsistent with classical theory. 
A) in the long run the Phillips curve is downward sloping which is consistent with classical theory. 
B) in the long run the Philips curve is downward sloping which is inconsistent with classical theory. 
C) in the long run the Phillips curve is vertical which is consistent with classical theory. 
D) in the long run the Phillips curve is vertical which is inconsistent with classical theory.

Question 5

A decrease in expected inflation shifts

Accepted Answer

A) the long-run Phillips curve left. 
B) the short-run Phillips curve left. 
C) neither the short-run nor long-run Phillips curve left. 
D) both the short-run and long-run Phillips curve left. 
A) the long-run Phillips curve left. 
B) the short-run Phillips curve left. 
C) neither the short-run nor long-run Phillips curve left. 
D) both the short-run and long-run Phillips curve left.

Question 6

Phillips found a

Accepted Answer

A) positive relation between unemployment and inflation in the United Kingdom. 
B) positive relation between unemployment and inflation in the United States. 
C) negative relation between unemployment and inflation in the United States. 
D) negative relation between unemployment and inflation in the United Kingdom. 
A) positive relation between unemployment and inflation in the United Kingdom. 
B) positive relation between unemployment and inflation in the United States. 
C) negative relation between unemployment and inflation in the United States. 
D) negative relation between unemployment and inflation in the United Kingdom.

Question 7

In the long run,the inflation rate depends primarily on money supply growth.

Accepted Answer

A) True 
 B)False

Question 8

The existence of sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied

Accepted Answer

A) in both the short and long run. 
B) in the short run, but not the long run. 
C) in the long run, but not the short run. 
D) in neither the short nor the long run. 
A) in both the short and long run. 
B) in the short run, but not the long run. 
C) in the long run, but not the short run. 
D) in neither the short nor the long run.

Question 9

In the long run an increase in the money supply growth rate effects

Accepted Answer

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

Question 10

Suppose that the central bank reduces the growth rate of the money supply.In the short-run the effects of this are shown by

Accepted Answer

A) moving to the left along the short-run Phillips curve. 
B) moving to the right along the short-run Phillips curve. 
C) shifting the short run Phillips curve right. 
D) shifting the short run Phillips curve left. 
A) moving to the left along the short-run Phillips curve. 
B) moving to the right along the short-run Phillips curve. 
C) shifting the short run Phillips curve right. 
D) shifting the short run Phillips curve left.

Question 11

If policymakers expand aggregate demand,then in the long run

Accepted Answer

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

Question 12

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

Accepted Answer

A) shifts both the long-run and the short-run Phillips curves right. 
B) shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C) shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D) None of the above is correct. 
A) shifts both the long-run and the short-run Phillips curves right. 
B) shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C) shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D) None of the above is correct.

Question 13

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 3 to 5

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 14

Figure 35-4
  
-Refer to figure 35-4.If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy,in the short run the economy moves to

Accepted Answer

A) 3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
B) 3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
C) 7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
D) 7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
A) 3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
B) 3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
C) 7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
D) 7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.

Question 15

The short-run Phillips curve intersects the long-run Phillips curve where

Accepted Answer

A) expected inflation is greater than actual inflation. 
B) expected inflation equals actual inflation. 
C) the quantity of goods and services demanded equals the quantity supplied. 
D) the quantity of labor demanded equals the quantity supplied. 
A) expected inflation is greater than actual inflation. 
B) expected inflation equals actual inflation. 
C) the quantity of goods and services demanded equals the quantity supplied. 
D) the quantity of labor demanded equals the quantity supplied.

Question 16

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 has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%.Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%.Then

Accepted Answer

A) unemployment falls, but it would have fallen less if people had been expecting 12.5% inflation. 
B) unemployment falls, but it would have fallen less if people had been expecting 25% inflation. 
C) unemployment rises, but it would have risen less if people had been expecting 12.5% inflation. 
D) unemployment rises, but it would have risen less if people had been expecting 25% inflation. 
A) unemployment falls, but it would have fallen less if people had been expecting 12.5% inflation. 
B) unemployment falls, but it would have fallen less if people had been expecting 25% inflation. 
C) unemployment rises, but it would have risen less if people had been expecting 12.5% inflation. 
D) unemployment rises, but it would have risen less if people had been expecting 25% inflation.

Question 17

Which of the following is correct?

Accepted Answer

A) In the short run, policymakers face a tradeoff between inflation and unemployment. 
B) Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left. 
C) Unemployment can be changed only by the use of government policy. 
D) The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible. 
A) In the short run, policymakers face a tradeoff between inflation and unemployment. 
B) Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left. 
C) Unemployment can be changed only by the use of government policy. 
D) The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible.

Question 18

Samuelson and Solow reasoned that when aggregate demand was high,unemployment was

Accepted Answer

A) low, so there was upward pressure on wages and prices. 
B) low, so there was downward pressure on wages and prices. 
C) high, so there was upward pressure on wages and prices. 
D) high, so there was downward pressure on wages and prices. 
A) low, so there was upward pressure on wages and prices. 
B) low, so there was downward pressure on wages and prices. 
C) high, so there was upward pressure on wages and prices. 
D) high, so there was downward pressure on wages and prices.

Question 19

A change in expected inflation shifts

Accepted Answer

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

Question 20

An adverse supply shock will shift short-run aggregate supply

Accepted Answer

A) right, making prices rise. 
B) left, making prices rise. 
C) right, making prices fall. 
D) left, making prices fall. 
A) right, making prices rise. 
B) left, making prices rise. 
C) right, making prices fall. 
D) left, making prices fall.

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

The natural rate of unemployment

Use the pair of diagrams below to answer the following questions. Figure 35-1 -Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.Starting from c and 3,in the short run an unexpected increase in money supply growth moves the economy to

Friedman and Phelps concluded that

A decrease in expected inflation shifts

Phillips found a

In the long run,the inflation rate depends primarily on money supply growth.

The existence of sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied

In the long run an increase in the money supply growth rate effects

Suppose that the central bank reduces the growth rate of the money supply.In the short-run the effects of this are shown by

If policymakers expand aggregate demand,then in the long run

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

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 3 to 5

Figure 35-4 -Refer to figure 35-4.If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy,in the short run the economy moves to

The short-run Phillips curve intersects the long-run Phillips curve where

Which of the following is correct?

Samuelson and Solow reasoned that when aggregate demand was high,unemployment was

A change in expected inflation shifts

An adverse supply shock will shift short-run aggregate supply

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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