Question 1

Along the long-run Phillips curve the unemployment rate ________ and the inflation rate ________.

Accepted Answer

A)  is equal to the natural unemployment rate; can be any value 
B)  can be any value; is equal to the natural inflation rate 
C)  is equal to the natural unemployment rate; is equal to the natural inflation rate 
D)  can be any value; can be any value 
E)  None of the above answers is correct. 
A)  is equal to the natural unemployment rate; can be any value 
B)  can be any value; is equal to the natural inflation rate 
C)  is equal to the natural unemployment rate; is equal to the natural inflation rate 
D)  can be any value; can be any value 
E)  None of the above answers is correct.

Question 2

How does the natural rate hypothesis relate to the AS-AD model?

Accepted Answer

The natural rate hypothesis is the propo

Question 3

Data from the United States and the United Kingdom show that the short-run Phillips curve exhibits

Accepted Answer

A)  a great deal of shifting. 
B)  stability with shifts occurring only when external forces are strong. 
C)  stability with shifts occurring only when there is an internal change of government. 
D)  shifts that occur every five years or so. 
E)  positive slopes in both nations. 
A)  a great deal of shifting. 
B)  stability with shifts occurring only when external forces are strong. 
C)  stability with shifts occurring only when there is an internal change of government. 
D)  shifts that occur every five years or so. 
E)  positive slopes in both nations.

Question 4

In the short run, a decrease in aggregate demand will lead to

Accepted Answer

A)  a decrease in the price level and an increase in real GDP. 
B)  an increase in the price level and a decrease in real GDP. 
C)  a decrease in the price level and an increase in the unemployment rate. 
D)  an increase in the price level and an increase in real GDP. 
E)  no change in the price level and a decrease in real GDP. 
A)  a decrease in the price level and an increase in real GDP. 
B)  an increase in the price level and a decrease in real GDP. 
C)  a decrease in the price level and an increase in the unemployment rate. 
D)  an increase in the price level and an increase in real GDP. 
E)  no change in the price level and a decrease in real GDP.

Question 5

Moving along the short-run Phillips curve, as the unemployment rate increases the inflation rate

Accepted Answer

A)  decreases. 
B)  increases. 
C)  remains unchanged. 
D)  initially decreases and then increases. 
E)  initially increases and then decreases. 
A)  decreases. 
B)  increases. 
C)  remains unchanged. 
D)  initially decreases and then increases. 
E)  initially increases and then decreases.

Question 6

If real GDP exceeds potential GDP, then employment is ________ full employment and the unemployment rate is ________ the natural unemployment rate.

Accepted Answer

A)  below; above 
B)  equal to; below 
C)  above; below 
D)  above; above 
E)  equal to; equal to 
A)  below; above 
B)  equal to; below 
C)  above; below 
D)  above; above 
E)  equal to; equal to

Question 7

In the long run, there is

Accepted Answer

A)  a tradeoff between unemployment and inflation. 
B)  a tradeoff between unemployment and real GDP. 
C)  no tradeoff between fiscal policy and monetary policy. 
D)  no tradeoff between unemployment and inflation. 
E)  a tradeoff between unemployment and natural unemployment. 
A)  a tradeoff between unemployment and inflation. 
B)  a tradeoff between unemployment and real GDP. 
C)  no tradeoff between fiscal policy and monetary policy. 
D)  no tradeoff between unemployment and inflation. 
E)  a tradeoff between unemployment and natural unemployment.

Question 8

A rational expectation of the inflation rate is

Accepted Answer

A)  a forecast based on the forecasted actions of the Fed and other relevant determinant factors. 
B)  an expected inflation rate between 1 percent and 5 percent. 
C)  a forecast based only on the historical evolution of inflation over the last 100 years. 
D)  an expected inflation rate between 5 percent and 10 percent. 
E)  always correct. 
A)  a forecast based on the forecasted actions of the Fed and other relevant determinant factors. 
B)  an expected inflation rate between 1 percent and 5 percent. 
C)  a forecast based only on the historical evolution of inflation over the last 100 years. 
D)  an expected inflation rate between 5 percent and 10 percent. 
E)  always correct.

Question 9

The long-run Phillips curve shows the relationship between

Accepted Answer

A)  inflation and unemployment at full employment. 
B)  aggregate demand and aggregate supply at full employment. 
C)  aggregate demand and interest rates at full employment. 
D)  inflation and interest rates at full employment. 
E)  the price level and real GDP when the economy is not at full employment. 
A)  inflation and unemployment at full employment. 
B)  aggregate demand and aggregate supply at full employment. 
C)  aggregate demand and interest rates at full employment. 
D)  inflation and interest rates at full employment. 
E)  the price level and real GDP when the economy is not at full employment.

Question 10

_______ is fixed when moving along the aggregate supply curve.

Accepted Answer

A)  The money wage rate 
B)  The real wage rate 
C)  Employment 
D)  Real GDP 
E)  The price level 
A)  The money wage rate 
B)  The real wage rate 
C)  Employment 
D)  Real GDP 
E)  The price level

Question 11

At full employment, the expected inflation rate is ________.

Accepted Answer

A)  equal to the inflation rate 
B)  higher than the inflation rate 
C)  lower than the inflation rate 
D)  unrelated to the inflation rate 
E)  unknown 
A)  equal to the inflation rate 
B)  higher than the inflation rate 
C)  lower than the inflation rate 
D)  unrelated to the inflation rate 
E)  unknown

Question 12

A rightward shift of the aggregate demand curve leads to

Accepted Answer

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

Question 13

The short-run Phillips curve shows the relationship between the

Accepted Answer

A)  inflation rate and the unemployment rate. 
B)  actual inflation rate and the expected inflation rate. 
C)  natural rate of unemployment and the expected inflation rate. 
D)  natural rate of unemployment and the actual unemployment rate. 
E)  natural rate of unemployment and the actual inflation rate. 
A)  inflation rate and the unemployment rate. 
B)  actual inflation rate and the expected inflation rate. 
C)  natural rate of unemployment and the expected inflation rate. 
D)  natural rate of unemployment and the actual unemployment rate. 
E)  natural rate of unemployment and the actual inflation rate.

Question 14

Okun's Law states that for each percentage point that the unemployment rate is above its natural rate, there is a ________ percent gap between real GDP and potential GDP.

Accepted Answer

A)  2 
B)  4 
C)  6 
D)  8 
E)  random 
A)  2 
B)  4 
C)  6 
D)  8 
E)  random

Question 15

Moving along the short-run Phillips curve, a ________ unemployment rate can only be achieved by paying the cost of ________.

Accepted Answer

A)  lower; a higher inflation rate 
B)  lower; a lower inflation rate 
C)  lower; a higher expected inflation rate 
D)  lower; a lower price level 
E)  higher; a higher inflation rate 
A)  lower; a higher inflation rate 
B)  lower; a lower inflation rate 
C)  lower; a higher expected inflation rate 
D)  lower; a lower price level 
E)  higher; a higher inflation rate

Question 16

In 1981, the Fed

Accepted Answer

A)  created a surprise inflation reduction policy and created an expansion. 
B)  created a surprise inflation reduction policy and created a recession. 
C)  credibly announced an inflation reduction policy and created a recession. 
D)  credibly announced an inflation reduction policy and created an expansion. 
E)  took no action so that the inflation rate skyrocketed. 
A)  created a surprise inflation reduction policy and created an expansion. 
B)  created a surprise inflation reduction policy and created a recession. 
C)  credibly announced an inflation reduction policy and created a recession. 
D)  credibly announced an inflation reduction policy and created an expansion. 
E)  took no action so that the inflation rate skyrocketed.

Question 17

The figure above shows some Phillips curves for an economy.
-Along the short-run Phillips curve SRPC₂ the natural unemployment rate is

Accepted Answer

A)  3 percent. 
B)  6 percent. 
C)  4 percent. 
D)  8 percent. 
E)  an amount that can be determined from the figure but none of the above answers are correct. 
A)  3 percent. 
B)  6 percent. 
C)  4 percent. 
D)  8 percent. 
E)  an amount that can be determined from the figure but none of the above answers are correct.

Question 18

How does the expected inflation rate affect the short-run Phillips curve tradeoff between inflation and unemployment?

Accepted Answer

The expected inflation rate affects the

Question 19

The lack of a long-run tradeoff between the unemployment rate and the inflation rate means that

Accepted Answer

A)  only fiscal policy is effective to lower the natural unemployment rate. 
B)  an increase in the inflation rate would not bring a reduction in the natural unemployment rate. 
C)  only a decrease in the inflation rate would bring a reduction in the natural unemployment rate. 
D)  only monetary policy is effective to lower the natural unemployment rate. 
E)  the natural unemployment rate cannot change. 
A)  only fiscal policy is effective to lower the natural unemployment rate. 
B)  an increase in the inflation rate would not bring a reduction in the natural unemployment rate. 
C)  only a decrease in the inflation rate would bring a reduction in the natural unemployment rate. 
D)  only monetary policy is effective to lower the natural unemployment rate. 
E)  the natural unemployment rate cannot change.

Question 20

If the Fed makes a credible announcement that it will now increase the growth of aggregate demand with faster money growth, there will be

Accepted Answer

A)  an upward shift of the short-run Phillips curve so that there is higher inflation without a decrease in unemployment. 
B)  a movement upward along an unchanging short-run Phillips curve so that inflation rises and unemployment decreases. 
C)  a rightward shift of the long-run Phillips curve. 
D)  no change in inflation or unemployment because the policy is credible and now anticipated. 
E)  a leftward shift of the long-run Phillips curve. 
A)  an upward shift of the short-run Phillips curve so that there is higher inflation without a decrease in unemployment. 
B)  a movement upward along an unchanging short-run Phillips curve so that inflation rises and unemployment decreases. 
C)  a rightward shift of the long-run Phillips curve. 
D)  no change in inflation or unemployment because the policy is credible and now anticipated. 
E)  a leftward shift of the long-run Phillips curve.

Along the long-run Phillips curve the unemployment rate and the inflation rate .

How does the natural rate hypothesis relate to the AS-AD model?

Data from the United States and the United Kingdom show that the short-run Phillips curve exhibits

In the short run, a decrease in aggregate demand will lead to

Moving along the short-run Phillips curve, as the unemployment rate increases the inflation rate

If real GDP exceeds potential GDP, then employment is full employment and the unemployment rate is the natural unemployment rate.

In the long run, there is

A rational expectation of the inflation rate is

The long-run Phillips curve shows the relationship between

_______ is fixed when moving along the aggregate supply curve.

At full employment, the expected inflation rate is ________.

A rightward shift of the aggregate demand curve leads to

The short-run Phillips curve shows the relationship between the

Okun's Law states that for each percentage point that the unemployment rate is above its natural rate, there is a ________ percent gap between real GDP and potential GDP.

Moving along the short-run Phillips curve, a unemployment rate can only be achieved by paying the cost of .

In 1981, the Fed

The figure above shows some Phillips curves for an economy. -Along the short-run Phillips curve SRPC₂ the natural unemployment rate is

How does the expected inflation rate affect the short-run Phillips curve tradeoff between inflation and unemployment?

The lack of a long-run tradeoff between the unemployment rate and the inflation rate means that

If the Fed makes a credible announcement that it will now increase the growth of aggregate demand with faster money growth, there will be

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

Along the long-run Phillips curve the unemployment rate ________ and the inflation rate ________.

How does the natural rate hypothesis relate to the AS-AD model?

Data from the United States and the United Kingdom show that the short-run Phillips curve exhibits

In the short run, a decrease in aggregate demand will lead to

Moving along the short-run Phillips curve, as the unemployment rate increases the inflation rate

If real GDP exceeds potential GDP, then employment is ________ full employment and the unemployment rate is ________ the natural unemployment rate.

In the long run, there is

A rational expectation of the inflation rate is

The long-run Phillips curve shows the relationship between

_______ is fixed when moving along the aggregate supply curve.

At full employment, the expected inflation rate is ________.

A rightward shift of the aggregate demand curve leads to

The short-run Phillips curve shows the relationship between the

Okun's Law states that for each percentage point that the unemployment rate is above its natural rate, there is a ________ percent gap between real GDP and potential GDP.

Moving along the short-run Phillips curve, a ________ unemployment rate can only be achieved by paying the cost of ________.

In 1981, the Fed

The figure above shows some Phillips curves for an economy. -Along the short-run Phillips curve SRPC₂ the natural unemployment rate is

How does the expected inflation rate affect the short-run Phillips curve tradeoff between inflation and unemployment?

The lack of a long-run tradeoff between the unemployment rate and the inflation rate means that

If the Fed makes a credible announcement that it will now increase the growth of aggregate demand with faster money growth, there will be

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

Along the long-run Phillips curve the unemployment rate and the inflation rate .

If real GDP exceeds potential GDP, then employment is full employment and the unemployment rate is the natural unemployment rate.

Moving along the short-run Phillips curve, a unemployment rate can only be achieved by paying the cost of .