Question 1

A movement from an upper point to a lower point on the Phillips curve shows

Accepted Answer

A) decrease in the inflation and decrease in the unemployment. 
B) increase in the inflation and decrease in the employment. 
C) increase in the inflation and increase in the employment. 
D) decrease in the inflation and increase in the unemployment. 
A) decrease in the inflation and decrease in the unemployment. 
B) increase in the inflation and decrease in the employment. 
C) increase in the inflation and increase in the employment. 
D) decrease in the inflation and increase in the unemployment.

Question 2

If workers always see inflation coming, and if they demand wage increases in advance so that inflation does not erode real wages, then the economy's aggregate supply curve on the AD-AS diagram will

Accepted Answer

A) be a vertical line corresponding to potential GDP. 
B) be a horizontal line corresponding to potential GDP. 
C) slope downward. 
D) slope upward. 
A) be a vertical line corresponding to potential GDP. 
B) be a horizontal line corresponding to potential GDP. 
C) slope downward. 
D) slope upward.

Question 3

If policy makers do nothing in response to a recessionary gap, what will happen?

Accepted Answer

A) a rapid movement toward lower unemployment and higher inflation 
B) a rapid movement toward lower unemployment and lower inflation 
C) a slow movement toward lower unemployment and higher inflation 
D) a slow movement toward lower unemployment and lower inflation 
A) a rapid movement toward lower unemployment and higher inflation 
B) a rapid movement toward lower unemployment and lower inflation 
C) a slow movement toward lower unemployment and higher inflation 
D) a slow movement toward lower unemployment and lower inflation

Question 4

A scatter diagram of the position of the U.S.economy from 1972 through 2007 with the price level on the vertical axis and real GDP on the horizontal axis would show a movement generally toward the

Accepted Answer

A) northwest. 
B) northeast. 
C) southwest. 
D) southeast. 
A) northwest. 
B) northeast. 
C) southwest. 
D) southeast.

Question 5

Figure 17-6
  
-The short-run Phillips curve in Figure 17-6 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 6

If business fluctuations are from demand-side forces,

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 7

Adverse shocks such as the crop failures of 1972-1973 and the oil price increases of 1974 and 1979 pushed the economy's

Accepted Answer

A) aggregate supply curve outward. 
B) Phillips curve inward toward the origin. 
C) aggregate supply curve inward. 
D) aggregate demand curve inward. 
A) aggregate supply curve outward. 
B) Phillips curve inward toward the origin. 
C) aggregate supply curve inward. 
D) aggregate demand curve inward.

Question 8

Figure 17-3
  
-Given the situation in graph (1) in Figure 17-3, 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 9

To make rational forecasts, your predictions do not have to be correct all of the time.

Accepted Answer

A) True 
 B)False

Question 10

Figure 17-7
  
-In Figure 17-7, the case for expansionary monetary policy and fiscal policy is strongest at point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 11

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called

Accepted Answer

A) the ideal rate of unemployment. 
B) the natural rate of unemployment. 
C) the full rate of unemployment. 
D) the mature rate of unemployment. 
A) the ideal rate of unemployment. 
B) the natural rate of unemployment. 
C) the full rate of unemployment. 
D) the mature rate of unemployment.

Question 12

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Accepted Answer

A) operating near full employment. 
B) on the horizontal part of the aggregate supply curve. 
C) operating with high unemployment. 
D) operating with substantial excess capacity. 
A) operating near full employment. 
B) on the horizontal part of the aggregate supply curve. 
C) operating with high unemployment. 
D) operating with substantial excess capacity.

Question 13

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

Accepted Answer

A) have a positive slope. 
B) have a negative slope. 
C) be vertical. 
D) be horizontal. 
A) have a positive slope. 
B) have a negative slope. 
C) be vertical. 
D) be horizontal.

Question 14

If aggregate demand in the U.S.had grown more slowly than it actually did in 2010, the

Accepted Answer

A) unemployment rate would have been even lower. 
B) inflation rate would have been even lower. 
C) unemployment rate would have been the same. 
D) economy would have grown faster. 
A) unemployment rate would have been even lower. 
B) inflation rate would have been even lower. 
C) unemployment rate would have been the same. 
D) economy would have grown faster.

Question 15

Aggregate demand grows because

Accepted Answer

A) patent laws protect and stimulate new inventions. 
B) there is more machinery and technology improves. 
C) the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. 
D) All of the above are correct. 
A) patent laws protect and stimulate new inventions. 
B) there is more machinery and technology improves. 
C) the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. 
D) All of the above are correct.

Question 16

Rational expectations are forecasts

Accepted Answer

A) that, while not necessarily correct, are the best that can be made given the available data. 
B) that are technically correct. 
C) that accurately predict the short-term trade-off between inflation and unemployment. 
D) made by economists using the most sophisticated econometric models. 
A) that, while not necessarily correct, are the best that can be made given the available data. 
B) that are technically correct. 
C) that accurately predict the short-term trade-off between inflation and unemployment. 
D) made by economists using the most sophisticated econometric models.

Question 17

If the income tax system were indexed, a person whose nominal income went up from $30,000 to $33,000 in a year when the price index rose by 10 percent would pay

Accepted Answer

A) no increases in nominal income taxes. 
B) no increases in real income taxes. 
C) lower taxes in both real and nominal terms. 
D) higher taxes in both real and nominal terms. 
A) no increases in nominal income taxes. 
B) no increases in real income taxes. 
C) lower taxes in both real and nominal terms. 
D) higher taxes in both real and nominal terms.

Question 18

Contractual provisions based on indexing are also called

Accepted Answer

A) withdrawal clauses. 
B) swap clauses. 
C) escalator clauses. 
D) averaging clauses. 
A) withdrawal clauses. 
B) swap clauses. 
C) escalator clauses. 
D) averaging clauses.

Question 19

At one time, policy makers interpreted the Phillips curve as offering a menu of inflation-unemployment choices.Today, the curve is no longer viewed this way.Why has the interpretation changed?

Accepted Answer

The original view stemmed from the effec

Question 20

The Phillips curve explains the trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Exam 34: The Trade-Off Between Inflation and Unemployment

A movement from an upper point to a lower point on the Phillips curve shows

If workers always see inflation coming, and if they demand wage increases in advance so that inflation does not erode real wages, then the economy's aggregate supply curve on the AD-AS diagram will

If policy makers do nothing in response to a recessionary gap, what will happen?

A scatter diagram of the position of the U.S.economy from 1972 through 2007 with the price level on the vertical axis and real GDP on the horizontal axis would show a movement generally toward the

Figure 17-6 -The short-run Phillips curve in Figure 17-6 would include which of the following points?

If business fluctuations are from demand-side forces,

Adverse shocks such as the crop failures of 1972-1973 and the oil price increases of 1974 and 1979 pushed the economy's

Figure 17-3 -Given the situation in graph (1) in Figure 17-3, what movement would be expected in graph (2) from the economy's self-correcting mechanism?

To make rational forecasts, your predictions do not have to be correct all of the time.

Figure 17-7 -In Figure 17-7, the case for expansionary monetary policy and fiscal policy is strongest at point

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

If aggregate demand in the U.S.had grown more slowly than it actually did in 2010, the

Aggregate demand grows because

Rational expectations are forecasts

If the income tax system were indexed, a person whose nominal income went up from $30,000 to $33,000 in a year when the price index rose by 10 percent would pay

Contractual provisions based on indexing are also called

At one time, policy makers interpreted the Phillips curve as offering a menu of inflation-unemployment choices.Today, the curve is no longer viewed this way.Why has the interpretation changed?

The Phillips curve explains the trade-off between inflation and unemployment.

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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