Question 1

If the U.S.economy had grown faster than it actually did from 2009 to 2010, the unemployment rate would have been higher.

Accepted Answer

A) True 
 B)False

Question 2

If the short-run Phillips curve has a very flat slope, the

Accepted Answer

A) structural deficit will grow during inflation. 
B) structural deficit will fall during recession. 
C) inflation costs of reducing unemployment are relatively low. 
D) inflation costs of reducing unemployment are relatively high. 
A) structural deficit will grow during inflation. 
B) structural deficit will fall during recession. 
C) inflation costs of reducing unemployment are relatively low. 
D) inflation costs of reducing unemployment are relatively high.

Question 3

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the most rapid inflation occurs when

Accepted Answer

A) unemployment is the highest, and the lowest inflation occurs when unemployment is the lowest. 
B) AS grows most rapidly, and the lowest inflation occurs when AS grows most slowly. 
C) AD rises most slowly, and the lowest inflation occurs when AD rises most rapidly. 
D) output grows most rapidly and the lowest inflation when output grows most slowly. 
A) unemployment is the highest, and the lowest inflation occurs when unemployment is the lowest. 
B) AS grows most rapidly, and the lowest inflation occurs when AS grows most slowly. 
C) AD rises most slowly, and the lowest inflation occurs when AD rises most rapidly. 
D) output grows most rapidly and the lowest inflation when output grows most slowly.

Question 4

The Phillips curve assumes that shocks to the economy come from the demand side.

Accepted Answer

A) True 
 B)False

Question 5

In the 1990s, the United States benefited from a series of favorable supply shocks.This caused 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 6

According to rational expectations theory, a long period of unemployment is necessary to reduce inflation.

Accepted Answer

A) True 
 B)False

Question 7

The unemployment rate for the U.S.economy in 2014 averaged about

Accepted Answer

A) 10.2 percent. 
B) 8.5 percent. 
C) 6.5 percent. 
D) 4 percent. 
A) 10.2 percent. 
B) 8.5 percent. 
C) 6.5 percent. 
D) 4 percent.

Question 8

If employees and employers always accurately predict inflation, what is the shape of the Phillips curve?

Accepted Answer

A) It is horizontal in the short and long run. 
B) It is vertical in the short and long run. 
C) It is vertical in the short run and upward sloping in the long run. 
D) It is downward sloping in the short run and vertical in the long run. 
A) It is horizontal in the short and long run. 
B) It is vertical in the short and long run. 
C) It is vertical in the short run and upward sloping in the long run. 
D) It is downward sloping in the short run and vertical in the long run.

Question 9

Figure 17-2
  
-Given the situation in graph (1) in Figure 17-2, what movement would be expected in graph (2) from the economy's self-correcting mechanism?

Accepted Answer

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

Question 10

An inflationary gap will eliminate itself through a process of price increases.

Accepted Answer

A) True 
 B)False

Question 11

In the 1960s and early 1970s, many economists and policy makers thought the Phillips curve was

Accepted Answer

A) interesting, but had no theory behind it. 
B) invalid and of no use to policy makers. 
C) of no interest in making macroeconomic policy. 
D) a "menu" of possible choices available to policy makers. 
A) interesting, but had no theory behind it. 
B) invalid and of no use to policy makers. 
C) of no interest in making macroeconomic policy. 
D) a "menu" of possible choices available to policy makers.

Question 12

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

Accepted Answer

A) falling interest rates that shift the aggregate demand curve outward. 
B) falling wage rates that shift the aggregate supply curve outward. 
C) rising wage rates that shift the aggregate supply curve inward. 
D) increases in the price level that shift the aggregate supply curve inward. 
A) falling interest rates that shift the aggregate demand curve outward. 
B) falling wage rates that shift the aggregate supply curve outward. 
C) rising wage rates that shift the aggregate supply curve inward. 
D) increases in the price level that shift the aggregate supply curve inward.

Question 13

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

Accepted Answer

A) It is reinforced, and made more applicable for policy. 
B) It is destroyed, and no longer applies for policy. 
C) It is unchanged, although the curve becomes less steep. 
D) It is unchanged, although the curve shifts inward and to the left. 
A) It is reinforced, and made more applicable for policy. 
B) It is destroyed, and no longer applies for policy. 
C) It is unchanged, although the curve becomes less steep. 
D) It is unchanged, although the curve shifts inward and to the left.

Question 14

Demand-side inflation is normally accompanied by

Accepted Answer

A) falling real GDP, while supply-side inflation may be accompanied by rising real GDP. 
B) falling real GDP; the same is true of supply-side inflation. 
C) rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
D) rising real GDP; the same is true of supply-side inflation. 
A) falling real GDP, while supply-side inflation may be accompanied by rising real GDP. 
B) falling real GDP; the same is true of supply-side inflation. 
C) rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
D) rising real GDP; the same is true of supply-side inflation.

Question 15

Based on the evidence, most economists believe that the self-correcting mechanism operates

Accepted Answer

A) slowly with prices, but quickly with wages. 
B) slowly with wages, but quickly with prices. 
C) very slowly with wages. 
D) efficiently, so that stabilization policy is not necessary. 
A) slowly with prices, but quickly with wages. 
B) slowly with wages, but quickly with prices. 
C) very slowly with wages. 
D) efficiently, so that stabilization policy is not necessary.

Question 16

Figure 17-8
  
-In Figure 17-8, the aggregate supply curve is shifting inward as we move from

Accepted Answer

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

Question 17

An increase in aggregate demand will reduce the unemployment rate only if the ensuing inflation is anticipated.

Accepted Answer

A) True 
 B)False

Question 18

A decrease in the price of foreign oil will affect the U.S.economy by

Accepted Answer

A) increasing aggregate demand. 
B) decreasing aggregate demand. 
C) increasing aggregate supply. 
D) decreasing aggregate supply. 
A) increasing aggregate demand. 
B) decreasing aggregate demand. 
C) increasing aggregate supply. 
D) decreasing aggregate supply.

Question 19

Policy makers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

Accepted Answer

A) moderate fiscal stimulus, no monetary stimulus 
B) fiscal and monetary tightness 
C) moderate monetary stimulus, fiscal tightness 
D) strong fiscal and monetary stimulus 
A) moderate fiscal stimulus, no monetary stimulus 
B) fiscal and monetary tightness 
C) moderate monetary stimulus, fiscal tightness 
D) strong fiscal and monetary stimulus

Question 20

According to the theory of rational expectations, errors in predicting inflation will

Accepted Answer

A) be biased upward more often than not. 
B) be purely random. 
C) tend to be biased downward when inflation is rising, and tend to be biased upward when inflation is falling. 
D) tend to be biased upward when inflation is rising, and tend to be biased downward when inflation is falling. 
A) be biased upward more often than not. 
B) be purely random. 
C) tend to be biased downward when inflation is rising, and tend to be biased upward when inflation is falling. 
D) tend to be biased upward when inflation is rising, and tend to be biased downward when inflation is falling.

Exam 34: The Trade-Off Between Inflation and Unemployment

If the U.S.economy had grown faster than it actually did from 2009 to 2010, the unemployment rate would have been higher.

If the short-run Phillips curve has a very flat slope, the

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the most rapid inflation occurs when

The Phillips curve assumes that shocks to the economy come from the demand side.

In the 1990s, the United States benefited from a series of favorable supply shocks.This caused a(n)

According to rational expectations theory, a long period of unemployment is necessary to reduce inflation.

The unemployment rate for the U.S.economy in 2014 averaged about

If employees and employers always accurately predict inflation, what is the shape of the Phillips curve?

Figure 17-2 -Given the situation in graph (1) in Figure 17-2, what movement would be expected in graph (2) from the economy's self-correcting mechanism?

An inflationary gap will eliminate itself through a process of price increases.

In the 1960s and early 1970s, many economists and policy makers thought the Phillips curve was

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

Demand-side inflation is normally accompanied by

Based on the evidence, most economists believe that the self-correcting mechanism operates

Figure 17-8 -In Figure 17-8, the aggregate supply curve is shifting inward as we move from

An increase in aggregate demand will reduce the unemployment rate only if the ensuing inflation is anticipated.

A decrease in the price of foreign oil will affect the U.S.economy by

Policy makers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

According to the theory of rational expectations, errors in predicting inflation will

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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