Question 1

In the long run, the inflation rate

Accepted Answer

A)  is equal to the natural inflation rate. 
B)  is zero. 
C)  can take on any value. 
D)  must be equal to the natural unemployment rate. 
E)  cannot be negative. 
A)  is equal to the natural inflation rate. 
B)  is zero. 
C)  can take on any value. 
D)  must be equal to the natural unemployment rate. 
E)  cannot be negative.

Question 2

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect bec

Question 3

If the Fed unexpectedly lowers the inflation rate, in the short run the unemployment rate ________ the natural unemployment rate and in the long run the unemployment rate ________ the natural unemployment rate.

Accepted Answer

A)  is less than; is less than 
B)  is larger than; equals 
C)  is larger than; is larger than 
D)  is less than; is larger than 
E)  is less than; equals 
A)  is less than; is less than 
B)  is larger than; equals 
C)  is larger than; is larger than 
D)  is less than; is larger than 
E)  is less than; equals

Question 4

Changes in which of the following shift the short-run Phillips curve?
i. Changes in the natural unemployment rate
ii. changes in the expected inflation rate
iii. changes in the inflation rate

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i, ii, and iii

Question 5

If the natural unemployment rate is 5 percent and the actual unemployment is 3 percent, then Okun's Law concludes that real GDP is

Accepted Answer

A)  2 percent greater than potential GDP. 
B)  4 percent greater than potential GDP. 
C)  2 percent less than potential GDP. 
D)  4 percent less than potential GDP. 
E)  3 percent greater than potential GDP. 
A)  2 percent greater than potential GDP. 
B)  4 percent greater than potential GDP. 
C)  2 percent less than potential GDP. 
D)  4 percent less than potential GDP. 
E)  3 percent greater than potential GDP.

Question 6

According to the AS-AD model, when real GDP exceeds potential GDP, the unemployment rate is definitely

Accepted Answer

A)  less than the natural unemployment rate. 
B)  equal to the natural unemployment rate. 
C)  greater than the natural unemployment rate. 
D)  falling. 
E)  rising. 
A)  less than the natural unemployment rate. 
B)  equal to the natural unemployment rate. 
C)  greater than the natural unemployment rate. 
D)  falling. 
E)  rising.

Question 7

Of the following polices, when would the unemployment rate not change?

Accepted Answer

A)  a surprise increase in inflation by the Fed 
B)  a surprise decrease in inflation by the Fed 
C)  an expected increase in inflation by the Fed 
D)  an expected decrease in inflation by the Fed 
E)  Both answers C and D are correct. 
A)  a surprise increase in inflation by the Fed 
B)  a surprise decrease in inflation by the Fed 
C)  an expected increase in inflation by the Fed 
D)  an expected decrease in inflation by the Fed 
E)  Both answers C and D are correct.

Question 8

In the short run, the level of real GDP changes with changes in the

Accepted Answer

A)  amount of capital used because the labor force is fixed. 
B)  level of technology because the labor force and capital are fixed. 
C)  money wage rate because it is assumed to be fully flexible. 
D)  quantity of labor because capital and technology are fixed. 
E)  amount of employment and amount of capital because technology is fixed. 
A)  amount of capital used because the labor force is fixed. 
B)  level of technology because the labor force and capital are fixed. 
C)  money wage rate because it is assumed to be fully flexible. 
D)  quantity of labor because capital and technology are fixed. 
E)  amount of employment and amount of capital because technology is fixed.

Question 9

During 2009, a country wants to reduce its inflation rate while maintaining its unemployment rate at its natural unemployment rate.To achieve these goals, the government should

Accepted Answer

A)  announce a credible increase in the inflation rate. 
B)  announce a credible slowdown in the inflation rate. 
C)  surprise the public with an increase in the inflation rate. 
D)  surprise the public with a decrease in the inflation rate. 
E)  announce a credible slowdown in the inflation rate and then actually increase the inflation rate. 
A)  announce a credible increase in the inflation rate. 
B)  announce a credible slowdown in the inflation rate. 
C)  surprise the public with an increase in the inflation rate. 
D)  surprise the public with a decrease in the inflation rate. 
E)  announce a credible slowdown in the inflation rate and then actually increase the inflation rate.

Question 10

In the short run, a surprise reduction of inflation by the Fed results in ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

Accepted Answer

A)  no change; no change 
B)  a leftward shift; an upward shift 
C)  no change; a downward shift 
D)  a rightward shift; an upward shift 
E)  a rightward shift; a downward shift 
A)  no change; no change 
B)  a leftward shift; an upward shift 
C)  no change; a downward shift 
D)  a rightward shift; an upward shift 
E)  a rightward shift; a downward shift

Question 11

The short-run Phillips curve shows a relationship between the

Accepted Answer

A)  inflation rate and the interest rate. 
B)  inflation rate and real GDP. 
C)  unemployment rate and the interest rate. 
D)  inflation rate and the unemployment rate. 
E)  price level and real GDP. 
A)  inflation rate and the interest rate. 
B)  inflation rate and real GDP. 
C)  unemployment rate and the interest rate. 
D)  inflation rate and the unemployment rate. 
E)  price level and real GDP.

Question 12

When an economy experiences a recession there is

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)  no change 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)  no change in the short-run Phillips curve.

Question 13

The long-run Phillips curve shows the relationship between the ________ and the ________ when there is no ________ unemployment.

Accepted Answer

A)  inflation rate; unemployment rate; cyclical 
B)  inflation rate; unemployment rate; structural 
C)  inflation rate; employment rate; seasonal 
D)  nominal interest rate; real interest rate; frictional 
E)  nominal interest rate; unemployment rate; cyclical 
A)  inflation rate; unemployment rate; cyclical 
B)  inflation rate; unemployment rate; structural 
C)  inflation rate; employment rate; seasonal 
D)  nominal interest rate; real interest rate; frictional 
E)  nominal interest rate; unemployment rate; cyclical

Question 14

If the natural unemployment rate is 4 percent and potential GDP is $30 billion, then according to Okun's law, when the unemployment rate falls to 3 percent, real GDP

Accepted Answer

A)  decreases to $29.4 billion. 
B)  remains constant at $30 billion. 
C)  first decreases by 4 percent and then increases by 4 percent. 
D)  increases to $30.6 billion. 
E)  increases to $60 billion. 
A)  decreases to $29.4 billion. 
B)  remains constant at $30 billion. 
C)  first decreases by 4 percent and then increases by 4 percent. 
D)  increases to $30.6 billion. 
E)  increases to $60 billion.

Question 15

Turkey reported an inflation rate of over 1,000 percent during a recent year.To reduce the inflation rate and not increase the unemployment rate, Turkey must

Accepted Answer

A)  increase government spending. 
B)  credibly announce a decrease in the growth of aggregate demand followed by decreasing the growth of aggregate demand. 
C)  have a surprise increase of the money supply. 
D)  reduce the natural unemployment rate. 
E)  credibly announce an increase in the growth of aggregate supply followed by increasing the growth of potential GDP. 
A)  increase government spending. 
B)  credibly announce a decrease in the growth of aggregate demand followed by decreasing the growth of aggregate demand. 
C)  have a surprise increase of the money supply. 
D)  reduce the natural unemployment rate. 
E)  credibly announce an increase in the growth of aggregate supply followed by increasing the growth of potential GDP.

Question 16

Discuss the relationship between the aggregate supply curve and the short-run Phillips curve.

Accepted Answer

The short-run Phillips curve and the agg

Question 17

Distinguish between the short-run and long-run Phillips curves.

Accepted Answer

The long-run Phillips curve shows the re

Question 18

Due to a "baby bust" in the 1960s and 1970s, fewer people entered the labor market in the 1980s and 1990s.This demographic event ________ the natural unemployment rate thereby shifting the short-run Phillips curve ________ and shifting the the long-run Phillips curve ________.

Accepted Answer

A)  increased; rightward; rightward 
B)  decreased; leftward; leftward 
C)  increased; rightward; leftward 
D)  increased; leftward; rightward 
E)  decreased; rightward; rightward 
A)  increased; rightward; rightward 
B)  decreased; leftward; leftward 
C)  increased; rightward; leftward 
D)  increased; leftward; rightward 
E)  decreased; rightward; rightward

Question 19

The natural rate hypothesis states that when the inflation rate _______, in the short run the unemployment rate ________ and in the long run the unemployment rate ________.

Accepted Answer

A)  rises, decreases; returns to the natural unemployment rate 
B)  rises, decreases; decreases 
C)  falls, decreases; decreases 
D)  falls, decreases; returns to the natural unemployment rate 
E)  falls, increases; decreases 
A)  rises, decreases; returns to the natural unemployment rate 
B)  rises, decreases; decreases 
C)  falls, decreases; decreases 
D)  falls, decreases; returns to the natural unemployment rate 
E)  falls, increases; decreases

Question 20

The natural rate hypothesis asserts that

Accepted Answer

A)  when prices change the inflation rate changes temporarily and then returns to its natural rate. 
B)  changes in the unemployment rate are natural and long-lasting. 
C)  price changes occur at a natural rate, near a 6 percent average inflation rate. 
D)  changes in the unemployment rate from changes in the inflation rate are temporary. 
E)  changes in the natural unemployment rate are only temporary. 
A)  when prices change the inflation rate changes temporarily and then returns to its natural rate. 
B)  changes in the unemployment rate are natural and long-lasting. 
C)  price changes occur at a natural rate, near a 6 percent average inflation rate. 
D)  changes in the unemployment rate from changes in the inflation rate are temporary. 
E)  changes in the natural unemployment rate are only temporary.

In the long run, the inflation rate

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

If the Fed unexpectedly lowers the inflation rate, in the short run the unemployment rate the natural unemployment rate and in the long run the unemployment rate the natural unemployment rate.

Changes in which of the following shift the short-run Phillips curve? i. Changes in the natural unemployment rate ii. changes in the expected inflation rate iii. changes in the inflation rate

If the natural unemployment rate is 5 percent and the actual unemployment is 3 percent, then Okun's Law concludes that real GDP is

According to the AS-AD model, when real GDP exceeds potential GDP, the unemployment rate is definitely

Of the following polices, when would the unemployment rate not change?

In the short run, the level of real GDP changes with changes in the

During 2009, a country wants to reduce its inflation rate while maintaining its unemployment rate at its natural unemployment rate.To achieve these goals, the government should

In the short run, a surprise reduction of inflation by the Fed results in in the long-run Phillips curve and in the short-run Phillips curve.

The short-run Phillips curve shows a relationship between the

When an economy experiences a recession there is

The long-run Phillips curve shows the relationship between the and the when there is no unemployment.

If the natural unemployment rate is 4 percent and potential GDP is $30 billion, then according to Okun's law, when the unemployment rate falls to 3 percent, real GDP

Turkey reported an inflation rate of over 1,000 percent during a recent year.To reduce the inflation rate and not increase the unemployment rate, Turkey must

Discuss the relationship between the aggregate supply curve and the short-run Phillips curve.

Distinguish between the short-run and long-run Phillips curves.

Due to a "baby bust" in the 1960s and 1970s, fewer people entered the labor market in the 1980s and 1990s.This demographic event the natural unemployment rate thereby shifting the short-run Phillips curve and shifting the the long-run Phillips curve .

The natural rate hypothesis states that when the inflation rate _, in the short run the unemployment rate and in the long run the unemployment rate __.

The natural rate hypothesis asserts that

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

In the long run, the inflation rate

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

If the Fed unexpectedly lowers the inflation rate, in the short run the unemployment rate ________ the natural unemployment rate and in the long run the unemployment rate ________ the natural unemployment rate.

Changes in which of the following shift the short-run Phillips curve? i. Changes in the natural unemployment rate ii. changes in the expected inflation rate iii. changes in the inflation rate

If the natural unemployment rate is 5 percent and the actual unemployment is 3 percent, then Okun's Law concludes that real GDP is

According to the AS-AD model, when real GDP exceeds potential GDP, the unemployment rate is definitely

Of the following polices, when would the unemployment rate not change?

In the short run, the level of real GDP changes with changes in the

During 2009, a country wants to reduce its inflation rate while maintaining its unemployment rate at its natural unemployment rate.To achieve these goals, the government should

In the short run, a surprise reduction of inflation by the Fed results in ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

The short-run Phillips curve shows a relationship between the

When an economy experiences a recession there is

The long-run Phillips curve shows the relationship between the ________ and the ________ when there is no ________ unemployment.

If the natural unemployment rate is 4 percent and potential GDP is $30 billion, then according to Okun's law, when the unemployment rate falls to 3 percent, real GDP

Turkey reported an inflation rate of over 1,000 percent during a recent year.To reduce the inflation rate and not increase the unemployment rate, Turkey must

Discuss the relationship between the aggregate supply curve and the short-run Phillips curve.

Distinguish between the short-run and long-run Phillips curves.

Due to a "baby bust" in the 1960s and 1970s, fewer people entered the labor market in the 1980s and 1990s.This demographic event ________ the natural unemployment rate thereby shifting the short-run Phillips curve ________ and shifting the the long-run Phillips curve ________.

The natural rate hypothesis states that when the inflation rate _______, in the short run the unemployment rate ________ and in the long run the unemployment rate ________.

The natural rate hypothesis asserts that

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 Fed unexpectedly lowers the inflation rate, in the short run the unemployment rate the natural unemployment rate and in the long run the unemployment rate the natural unemployment rate.

In the short run, a surprise reduction of inflation by the Fed results in in the long-run Phillips curve and in the short-run Phillips curve.

The long-run Phillips curve shows the relationship between the and the when there is no unemployment.

Due to a "baby bust" in the 1960s and 1970s, fewer people entered the labor market in the 1980s and 1990s.This demographic event the natural unemployment rate thereby shifting the short-run Phillips curve and shifting the the long-run Phillips curve .

The natural rate hypothesis states that when the inflation rate _, in the short run the unemployment rate and in the long run the unemployment rate __.