Question 1

Every year from 1954 to 1984, the U.S.economy was characterized by higher output and lower prices.

Accepted Answer

A) True 
 B)False

Question 2

Figure 17-6
  
-The long-run Phillips curve in Figure 17-6 (b) would include which of the following points?

Accepted Answer

A) g, e, m 
B) g, e, r 
C) j, e, r 
D) j, e, m 
A) g, e, m 
B) g, e, r 
C) j, e, r 
D) j, e, m

Question 3

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

Accepted Answer

A) Contango 
B) Swap 
C) Averaging 
D) Indexing 
A) Contango 
B) Swap 
C) Averaging 
D) Indexing

Question 4

The intent of indexing is to

Accepted Answer

A) raise tax revenue automatically during inflation. 
B) shift the short-run Phillips curve to the right. 
C) take most of the sting out of inflation. 
D) reduce inflation gradually. 
A) raise tax revenue automatically during inflation. 
B) shift the short-run Phillips curve to the right. 
C) take most of the sting out of inflation. 
D) reduce inflation gradually.

Question 5

Some of the promising approaches to reducing the natural rate of unemployment have to do with education, training, and job placement.What implementation problems do you anticipate?

Accepted Answer

Training and placement programs sometime

Question 6

European governments accepted prolonged periods of unemployment in the 1990s in order to reduce inflation.

Accepted Answer

A) True 
 B)False

Question 7

If the self-correcting mechanism operates quickly,

Accepted Answer

A) direct intervention is less necessary to close a recessionary gap. 
B) fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. 
C) monetary policy is far more useful in closing a recessionary gap than fiscal policy. 
D) fiscal stimulus is ineffective and inflation will occur. 
A) direct intervention is less necessary to close a recessionary gap. 
B) fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. 
C) monetary policy is far more useful in closing a recessionary gap than fiscal policy. 
D) fiscal stimulus is ineffective and inflation will occur.

Question 8

In 2008-2010, American policy makers decided to risk

Accepted Answer

A) higher inflation for the sake of decreasing unemployment. 
B) higher unemployment to hold down inflation. 
C) increasing taxes for the sake of reducing the budget deficit. 
D) reducing government spending for the sake of balancing the budget. 
A) higher inflation for the sake of decreasing unemployment. 
B) higher unemployment to hold down inflation. 
C) increasing taxes for the sake of reducing the budget deficit. 
D) reducing government spending for the sake of balancing the budget.

Question 9

Inflation targeting requires monetary policy makers to rely heavily on the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 10

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

Accepted Answer

A) generally accepted by politicians, although few economists accept this proposal. 
B) largely accepted by most economists, although politicians do not agree. 
C) highly debatable, because many do not agree that price stability should be the most important goal. 
D) simply incorrect, and no one accepts this idea anymore. 
A) generally accepted by politicians, although few economists accept this proposal. 
B) largely accepted by most economists, although politicians do not agree. 
C) highly debatable, because many do not agree that price stability should be the most important goal. 
D) simply incorrect, and no one accepts this idea anymore.

Question 11

Figure 17-8
  
-In Figure 17-8, which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?

Accepted Answer

A) A to B to C 
B) E to A to B 
C) C to D to E 
D) D to E to C 
A) A to B to C 
B) E to A to B 
C) C to D to E 
D) D to E to C

Question 12

Figure 17-4
  
-Which panel in Figure 17-4 shows the movement associated with the supply-side changes of the 1990s?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 13

If the favorable supply shocks of the 1990s were reversed in the future, we should expect a(n)

Accepted Answer

A) increase in inflation and unemployment. 
B) decrease in inflation and unemployment. 
C) increase in inflation and a decrease in unemployment. 
D) decrease in inflation and an increase in unemployment. 
A) increase in inflation and unemployment. 
B) decrease in inflation and unemployment. 
C) increase in inflation and a decrease in unemployment. 
D) decrease in inflation and an increase in unemployment.

Question 14

If economic fluctuations originate on the supply side,

Accepted Answer

A) there will be no relationship between unemployment and inflation. 
B) real wage increases will be necessary to eliminate unemployment. 
C) inflation and unemployment will be negatively related. 
D) inflation and unemployment will be positively related. 
A) there will be no relationship between unemployment and inflation. 
B) real wage increases will be necessary to eliminate unemployment. 
C) inflation and unemployment will be negatively related. 
D) inflation and unemployment will be positively related.

Question 15

Politicians and economists who are generally conservative tend to believe that

Accepted Answer

A) the self-correcting mechanism is slow and unpredictable. 
B) the short-run Phillips curve is relatively steep. 
C) the costs of unemployment are high. 
D) expectations in reaction to policy measures are very slow to change. 
A) the self-correcting mechanism is slow and unpredictable. 
B) the short-run Phillips curve is relatively steep. 
C) the costs of unemployment are high. 
D) expectations in reaction to policy measures are very slow to change.

Question 16

Figure 17-4
  
-Which panel in Figure 17-4 shows the movement associated with a demand-side inflation?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 17

One piece of evidence that business fluctuations are caused by demand-side changes would be that

Accepted Answer

A) monetary and fiscal policy will move inversely. 
B) interest rates and budget deficits will move inversely. 
C) unemployment and inflation will move inversely. 
D) unemployment and budget deficits will move inversely. 
A) monetary and fiscal policy will move inversely. 
B) interest rates and budget deficits will move inversely. 
C) unemployment and inflation will move inversely. 
D) unemployment and budget deficits will move inversely.

Question 18

Figure 17-8
  
-In Figure 17-8, which of the following movements reflects the closing of a recessionary gap with an expansionary monetary and fiscal policy?

Accepted Answer

A) C to B 
B) D to C 
C) C to E 
D) D to E 
A) C to B 
B) D to C 
C) C to E 
D) D to E

Question 19

Figure 17-8
  
-In Figure 17-8, which of the following movements reflects the closing of a recessionary gap through the economy's self-correcting mechanism?

Accepted Answer

A) A to B 
B) A to C 
C) C to E 
D) D to E 
A) A to B 
B) A to C 
C) C to E 
D) D to E

Question 20

Monetarists typically favor strong policy measures to fight recession.

Accepted Answer

A) True 
 B)False

Exam 34: The Trade-Off Between Inflation and Unemployment

Every year from 1954 to 1984, the U.S.economy was characterized by higher output and lower prices.

Figure 17-6 -The long-run Phillips curve in Figure 17-6 (b) would include which of the following points?

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

The intent of indexing is to

Some of the promising approaches to reducing the natural rate of unemployment have to do with education, training, and job placement.What implementation problems do you anticipate?

European governments accepted prolonged periods of unemployment in the 1990s in order to reduce inflation.

If the self-correcting mechanism operates quickly,

In 2008-2010, American policy makers decided to risk

Inflation targeting requires monetary policy makers to rely heavily on the Phillips curve.

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

Figure 17-8 -In Figure 17-8, which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?

Figure 17-4 -Which panel in Figure 17-4 shows the movement associated with the supply-side changes of the 1990s?

If the favorable supply shocks of the 1990s were reversed in the future, we should expect a(n)

If economic fluctuations originate on the supply side,

Politicians and economists who are generally conservative tend to believe that

Figure 17-4 -Which panel in Figure 17-4 shows the movement associated with a demand-side inflation?

One piece of evidence that business fluctuations are caused by demand-side changes would be that

Figure 17-8 -In Figure 17-8, which of the following movements reflects the closing of a recessionary gap with an expansionary monetary and fiscal policy?

Figure 17-8 -In Figure 17-8, which of the following movements reflects the closing of a recessionary gap through the economy's self-correcting mechanism?

Monetarists typically favor strong policy measures to fight recession.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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