Question 1

"The short-run Phillips curve shifts leftward when the inflation rate rises." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.An

Question 2

In the long run, what is the tradeoff between inflation and unemployment?
 Explain your answer using Phillips curve analysis.

Accepted Answer

In the long run, there is no tradeoff be

Question 3

The natural unemployment rate

Accepted Answer

A)  increases when job search increases. 
B)  never changes. 
C)  always increases. 
D)  decreases when the inflation rate rises. 
E)  increases when the expected inflation rate rises. 
A)  increases when job search increases. 
B)  never changes. 
C)  always increases. 
D)  decreases when the inflation rate rises. 
E)  increases when the expected inflation rate rises.

Question 4

An increase in the expected inflation rate

Accepted Answer

A)  leads to a movement downward along the short-run Phillips curve. 
B)  leads to a movement upward along the short-run Phillips curve. 
C)  shifts the short-run Phillips curve rightward. 
D)  shifts the short-run Phillips curve leftward. 
E)  shifts the long-run Phillips curve rightward. 
A)  leads to a movement downward along the short-run Phillips curve. 
B)  leads to a movement upward along the short-run Phillips curve. 
C)  shifts the short-run Phillips curve rightward. 
D)  shifts the short-run Phillips curve leftward. 
E)  shifts the long-run Phillips curve rightward.

Question 5

When people use all the relevant data and principles of economics to forecast inflation, they are making

Accepted Answer

A)  a mistake. 
B)  what is called a "rational expectation." 
C)  an exaggerated forecast. 
D)  an always accurate forecast. 
E)  what is called a "data-based forecast." 
A)  a mistake. 
B)  what is called a "rational expectation." 
C)  an exaggerated forecast. 
D)  an always accurate forecast. 
E)  what is called a "data-based forecast."

Question 6

If the price level is 100 in one year and rises to 102 the next year, then the inflation rate is

Accepted Answer

A)  2.0 percent. 
B)  0.02 percent. 
C)  102 percent. 
D)  100 percent. 
E)  unable to be determined without knowing potential GDP. 
A)  2.0 percent. 
B)  0.02 percent. 
C)  102 percent. 
D)  100 percent. 
E)  unable to be determined without knowing potential GDP.

Question 7

Because money growth is a major component determining the inflation rate, in order to forecast inflation we should forecast actions by the

Accepted Answer

A)  Office of the Treasury. 
B)  President. 
C)  Congress. 
D)  Fed. 
E)  U.S.Mint. 
A)  Office of the Treasury. 
B)  President. 
C)  Congress. 
D)  Fed. 
E)  U.S.Mint.

Question 8

If aggregate demand increases, thereby leading to an increase in real GDP and inflation, there is a

Accepted Answer

A)  movement downward along the short-run Phillips curve. 
B)  movement upward along the short-run Phillips curve. 
C)  rightward shift in the short-run Phillips curve. 
D)  leftward shift in the short-run Phillips curve. 
E)  neither a movement along nor a shift in the short-run Phillips curve. 
A)  movement downward along the short-run Phillips curve. 
B)  movement upward along the short-run Phillips curve. 
C)  rightward shift in the short-run Phillips curve. 
D)  leftward shift in the short-run Phillips curve. 
E)  neither a movement along nor a shift in the short-run Phillips curve.

Question 9

What does the short-run Phillips curve indicate about the tradeoff between inflation and unemployment?

Accepted Answer

Because the slope of the short-run Phill

Question 10

-In the figure above, the expected inflation rate is

Accepted Answer

A)  0 percent. 
B)  2 percent. 
C)  4 percent. 
D)  6 percent. 
E)  8 percent. 
A)  0 percent. 
B)  2 percent. 
C)  4 percent. 
D)  6 percent. 
E)  8 percent.

Question 11

If the economy is at full employment, then the unemployment rate

Accepted Answer

A)  is greater than the natural unemployment rate. 
B)  is equal to the natural unemployment rate. 
C)  is below the natural unemployment rate. 
D)  can be anywhere on a short-run Phillips curve. 
E)  is equal to zero. 
A)  is greater than the natural unemployment rate. 
B)  is equal to the natural unemployment rate. 
C)  is below the natural unemployment rate. 
D)  can be anywhere on a short-run Phillips curve. 
E)  is equal to zero.

Question 12

The short-run Phillips curve shows only a short-run tradeoff between the unemployment rate and the inflation rate because in the long run the

Accepted Answer

A)  natural unemployment rate increases. 
B)  expected inflation rate increases. 
C)  unemployment rate returns to the natural unemployment rate and so there is no long-run tradeoff between the inflation rate and the unemployment rate. 
D)  inflation rate returns to the natural inflation rate and so there is no long-run tradeoff between the inflation rate and the unemployment rate. 
E)  inflation rate returns to the natural inflation rate and the unemployment rate returns to the natural unemployment rate. 
A)  natural unemployment rate increases. 
B)  expected inflation rate increases. 
C)  unemployment rate returns to the natural unemployment rate and so there is no long-run tradeoff between the inflation rate and the unemployment rate. 
D)  inflation rate returns to the natural inflation rate and so there is no long-run tradeoff between the inflation rate and the unemployment rate. 
E)  inflation rate returns to the natural inflation rate and the unemployment rate returns to the natural unemployment rate.

Question 13

The natural unemployment rate is 4 percent and the actual unemployment rate is 7 percent.According to Okun's Law, how does of real GDP compare to potential GDP?

Accepted Answer

The gap between the natural unemployment

Question 14

In the short run, if the economy is at full employment then the quantity of real GDP

Accepted Answer

A)  is equal to potential GDP and the unemployment rate is equal to the natural unemployment rate. 
B)  does not necessarily equal potential GDP but the unemployment rate is equal to the natural unemployment rate. 
C)  exceeds potential GDP and the unemployment rate is less than the natural unemployment rate. 
D)  is equal to potential GDP but the unemployment rate is less than the natural unemployment rate. 
E)  is equal to potential GDP but the unemployment rate does not necessarily equal the natural unemployment rate. 
A)  is equal to potential GDP and the unemployment rate is equal to the natural unemployment rate. 
B)  does not necessarily equal potential GDP but the unemployment rate is equal to the natural unemployment rate. 
C)  exceeds potential GDP and the unemployment rate is less than the natural unemployment rate. 
D)  is equal to potential GDP but the unemployment rate is less than the natural unemployment rate. 
E)  is equal to potential GDP but the unemployment rate does not necessarily equal the natural unemployment rate.

Question 15

In the long run, the unemployment rate

Accepted Answer

A)  is zero. 
B)  is equal to the natural unemployment rate. 
C)  can take on any value. 
D)  is equal to the expected unemployment rate. 
E)  must be equal to the expected inflation rate. 
A)  is zero. 
B)  is equal to the natural unemployment rate. 
C)  can take on any value. 
D)  is equal to the expected unemployment rate. 
E)  must be equal to the expected inflation rate.

Question 16

When the expected inflation rate changes, what happens to the short-run Phillips curve?
 To the long-run Phillips curve?

Accepted Answer

When the expected inflation rate changes

Question 17

If the expected inflation rate changes, the long-run Phillips curve ________ and the short-run Phillips curve ________.

Accepted Answer

A)  does not shift; does not shift 
B)  does not shift; shifts upward 
C)  shifts rightward; shifts upward 
D)  shifts rightward; shifts downward 
E)  shifts rightward; does not shift 
A)  does not shift; does not shift 
B)  does not shift; shifts upward 
C)  shifts rightward; shifts upward 
D)  shifts rightward; shifts downward 
E)  shifts rightward; does not shift

Question 18

Suppose an economy experiences a permanent increase in its expected inflation rate.As a result, there is

Accepted Answer

A)  an upward movement along the short-run Phillips curve. 
B)  a downward movement along the short-run Phillips curve. 
C)  a downward shift of the short-run Phillips curve. 
D)  an upward shift of the short-run Phillips curve. 
E)  no change at all to the short-run Phillips curve. 
A)  an upward movement along the short-run Phillips curve. 
B)  a downward movement along the short-run Phillips curve. 
C)  a downward shift of the short-run Phillips curve. 
D)  an upward shift of the short-run Phillips curve. 
E)  no change at all to the short-run Phillips curve.

Question 19

When the natural unemployment rate ________, the short-run Phillips curve shifts ________ and the long-run Phillips curve shifts ________.

Accepted Answer

A)  increases; downward; leftward 
B)  decreases; upward; rightward 
C)  decreases; downward; rightward 
D)  increases; upward; rightward 
E)  increases; upward; leftward 
A)  increases; downward; leftward 
B)  decreases; upward; rightward 
C)  decreases; downward; rightward 
D)  increases; upward; rightward 
E)  increases; upward; leftward

Question 20

The short-run Phillips curve is downward sloping because

Accepted Answer

A)  the expected inflation rate is zero in the short run. 
B)  the unemployment rate can be above or below the natural unemployment rate. 
C)  reducing the unemployment rate will reduce the inflation rate in the short run. 
D)  the economy always returns to full employment. 
E)  in the long run, the expected inflation rate equals the actual inflation rate. 
A)  the expected inflation rate is zero in the short run. 
B)  the unemployment rate can be above or below the natural unemployment rate. 
C)  reducing the unemployment rate will reduce the inflation rate in the short run. 
D)  the economy always returns to full employment. 
E)  in the long run, the expected inflation rate equals the actual inflation rate.

"The short-run Phillips curve shifts leftward when the inflation rate rises." Is the previous statement correct or incorrect?

In the long run, what is the tradeoff between inflation and unemployment? Explain your answer using Phillips curve analysis.

The natural unemployment rate

An increase in the expected inflation rate

When people use all the relevant data and principles of economics to forecast inflation, they are making

If the price level is 100 in one year and rises to 102 the next year, then the inflation rate is

Because money growth is a major component determining the inflation rate, in order to forecast inflation we should forecast actions by the

If aggregate demand increases, thereby leading to an increase in real GDP and inflation, there is a

What does the short-run Phillips curve indicate about the tradeoff between inflation and unemployment?

-In the figure above, the expected inflation rate is

If the economy is at full employment, then the unemployment rate

The short-run Phillips curve shows only a short-run tradeoff between the unemployment rate and the inflation rate because in the long run the

The natural unemployment rate is 4 percent and the actual unemployment rate is 7 percent.According to Okun's Law, how does of real GDP compare to potential GDP?

In the short run, if the economy is at full employment then the quantity of real GDP

In the long run, the unemployment rate

When the expected inflation rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

If the expected inflation rate changes, the long-run Phillips curve and the short-run Phillips curve .

Suppose an economy experiences a permanent increase in its expected inflation rate.As a result, there is

When the natural unemployment rate , the short-run Phillips curve shifts and the long-run Phillips curve shifts .

The short-run Phillips curve is downward sloping because

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 15: The Short-Run Policy Tradeoff

"The short-run Phillips curve shifts leftward when the inflation rate rises." Is the previous statement correct or incorrect?

In the long run, what is the tradeoff between inflation and unemployment? Explain your answer using Phillips curve analysis.

The natural unemployment rate

An increase in the expected inflation rate

When people use all the relevant data and principles of economics to forecast inflation, they are making

If the price level is 100 in one year and rises to 102 the next year, then the inflation rate is

Because money growth is a major component determining the inflation rate, in order to forecast inflation we should forecast actions by the

If aggregate demand increases, thereby leading to an increase in real GDP and inflation, there is a

What does the short-run Phillips curve indicate about the tradeoff between inflation and unemployment?

-In the figure above, the expected inflation rate is

If the economy is at full employment, then the unemployment rate

The short-run Phillips curve shows only a short-run tradeoff between the unemployment rate and the inflation rate because in the long run the

The natural unemployment rate is 4 percent and the actual unemployment rate is 7 percent.According to Okun's Law, how does of real GDP compare to potential GDP?

In the short run, if the economy is at full employment then the quantity of real GDP

In the long run, the unemployment rate

When the expected inflation rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

If the expected inflation rate changes, the long-run Phillips curve ________ and the short-run Phillips curve ________.

Suppose an economy experiences a permanent increase in its expected inflation rate.As a result, there is

When the natural unemployment rate ________, the short-run Phillips curve shifts ________ and the long-run Phillips curve shifts ________.

The short-run Phillips curve is downward sloping because

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

If the expected inflation rate changes, the long-run Phillips curve and the short-run Phillips curve .

When the natural unemployment rate , the short-run Phillips curve shifts and the long-run Phillips curve shifts .