Question 1

If inflation is less than expected, then the unemployment rate is

Accepted Answer

A) greater than the natural rate. In the long run the short-run Phillips curve will shift right. 
B) greater than the natural rate. In the long run the short-run Phillips curve will shift left. 
C) less than the natural rate. In the long run the short-run Phillips curve will shift right. 
D) less than the natural rate. In the long run the short-run Phillips curve will shift left. 
A) greater than the natural rate. In the long run the short-run Phillips curve will shift right. 
B) greater than the natural rate. In the long run the short-run Phillips curve will shift left. 
C) less than the natural rate. In the long run the short-run Phillips curve will shift right. 
D) less than the natural rate. In the long run the short-run Phillips curve will shift left.

Question 2

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 3

According to the Phillips curve, unemployment and inflation are positively related in

Accepted Answer

A) the short run and in the long run. 
B) the short run, but not in the long run. 
C) the long run, but not in the short run. 
D) neither the long run nor the short run. 
A) the short run and in the long run. 
B) the short run, but not in the long run. 
C) the long run, but not in the short run. 
D) neither the long run nor the short run.

Question 4

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Accepted Answer

A) both the price level and output 
B) the price level but not output 
C) output but not the price level 
D) neither output nor the price level 
A) both the price level and output 
B) the price level but not output 
C) output but not the price level 
D) neither output nor the price level

Question 5

Figure 22-7
Use this graph to answer the questions below.  
-Refer to figure 22-7. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A) 7% unemployment and 1% inflation 
B) 7% unemployment and 3% inflation 
C) 3% unemployment and 5% inflation 
D) 3% unemployment and 7% inflation 
A) 7% unemployment and 1% inflation 
B) 7% unemployment and 3% inflation 
C) 3% unemployment and 5% inflation 
D) 3% unemployment and 7% inflation

Question 6

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

Accepted Answer

A) raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right. 
B) raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left. 
C) reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right. 
D) reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left. 
A) raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right. 
B) raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left. 
C) reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right. 
D) reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.

Question 7

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Accepted Answer

A) the natural rate of unemployment and monetary growth. 
B) the natural rate of unemployment, but not monetary growth. 
C) monetary growth, but not the natural rate of unemployment. 
D) neither monetary growth nor the natural rate of unemployment. 
A) the natural rate of unemployment and monetary growth. 
B) the natural rate of unemployment, but not monetary growth. 
C) monetary growth, but not the natural rate of unemployment. 
D) neither monetary growth nor the natural rate of unemployment.

Question 8

Figure 22-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 22-1. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left-hand graph. Then it is apparent that the price index equaled

Accepted Answer

A) 130 in 2011. 
B) 115 in 2011. 
C) 110 in 2011. 
D) 100 in 2011. 
A) 130 in 2011. 
B) 115 in 2011. 
C) 110 in 2011. 
D) 100 in 2011.

Question 9

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Accepted Answer

Friedman and Phelps predicted that, over

Question 10

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%, then

Accepted Answer

A) unemployment falls but it would have fallen by more if the Bank of highland had reduced inflation to 5% rather than 3%. 
B) unemployment falls but it would have fallen by less if the Bank of highland had reduced inflation to 5% rather than 3%. 
C) unemployment rises but it would have risen by more if the Bank of highland had reduced inflation to 5% rather than 3%. 
D) unemployment rises but it would have risen by less if the Bank of highland had reduced inflation to 5% rather than 3%. 
A) unemployment falls but it would have fallen by more if the Bank of highland had reduced inflation to 5% rather than 3%. 
B) unemployment falls but it would have fallen by less if the Bank of highland had reduced inflation to 5% rather than 3%. 
C) unemployment rises but it would have risen by more if the Bank of highland had reduced inflation to 5% rather than 3%. 
D) unemployment rises but it would have risen by less if the Bank of highland had reduced inflation to 5% rather than 3%.

Question 11

In 1980, the U.S. misery index was

Accepted Answer

A) much higher than average. 
B) slightly higher than average. 
C) about average. 
D) below average. 
A) much higher than average. 
B) slightly higher than average. 
C) about average. 
D) below average.

Question 12

If there is an adverse supply shock, then

Accepted Answer

A) unemployment rises and the short-run Phillips curve shifts right. 
B) unemployment rises and the short-run Phillips curve shifts left. 
C) unemployment falls and the short-run Phillips curve shifts right. 
D) unemployment falls and the short-run Phillips curve shifts left. 
A) unemployment rises and the short-run Phillips curve shifts right. 
B) unemployment rises and the short-run Phillips curve shifts left. 
C) unemployment falls and the short-run Phillips curve shifts right. 
D) unemployment falls and the short-run Phillips curve shifts left.

Question 13

In the long run, an increase in the money supply growth rate

Accepted Answer

A) raises expected inflation so the short-run Phillips curve shifts right. 
B) raises expected inflation so the short-run Phillips curve shifts left. 
C) reduces expected inflation so the short-run Phillips curve shifts left. 
D) None of the above is correct. 
A) raises expected inflation so the short-run Phillips curve shifts right. 
B) raises expected inflation so the short-run Phillips curve shifts left. 
C) reduces expected inflation so the short-run Phillips curve shifts left. 
D) None of the above is correct.

Question 14

Figure 22-6
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 22-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Accepted Answer

A) A and 1. 
B) B and 2. 
C) back to C and 3. 
D) D and 4. 
A) A and 1. 
B) B and 2. 
C) back to C and 3. 
D) D and 4.

Question 15

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A) inflation but not the unemployment rate; this is consistent with classical theory. 
B) inflation but not the unemployment rate; this is inconsistent with classical theory. 
C) the unemployment rate but not inflation; this is consistent with classical theory. 
D) the unemployment rate but not inflation; this is inconsistent with classical theory. 
A) inflation but not the unemployment rate; this is consistent with classical theory. 
B) inflation but not the unemployment rate; this is inconsistent with classical theory. 
C) the unemployment rate but not inflation; this is consistent with classical theory. 
D) the unemployment rate but not inflation; this is inconsistent with classical theory.

Question 16

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland reduced inflation to its announced goal of 5%. However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year. Which of the following is correct?

Accepted Answer

A) Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 3. 
B) Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 1. 
C) Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 3. 
D) Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 1. 
A) Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 3. 
B) Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 1. 
C) Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 3. 
D) Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 1.

Question 17

If policymakers expand aggregate demand, then in the long run

Accepted Answer

A) prices will be higher and unemployment will be lower. 
B) prices will be higher and unemployment will be unchanged. 
C) prices and unemployment will be unchanged. 
D) None of the above is correct. 
A) prices will be higher and unemployment will be lower. 
B) prices will be higher and unemployment will be unchanged. 
C) prices and unemployment will be unchanged. 
D) None of the above is correct.

Question 18

Figure 22-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Accepted Answer

A) A and 2. 
B) D and 3. 
C) E and 3. 
D) None of the above is correct. 
A) A and 2. 
B) D and 3. 
C) E and 3. 
D) None of the above is correct.

Question 19

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Accepted Answer

A) is completely correct. 
B) is completely wrong. 
C) is true for the short run but not the long run. 
D) is true for the long run but not the short run. 
A) is completely correct. 
B) is completely wrong. 
C) is true for the short run but not the long run. 
D) is true for the long run but not the short run.

Question 20

If an increase in inflation permanently reduced unemployment then,

Accepted Answer

A) money would not be neutral and the long-run Phillips curve would slope upward. 
B) money would not be neutral and the long-run Phillips curve would slope downward. 
C) money would be neutral and the long-run Phillips curve would slope upward. 
D) money would be neutral and the long-run Phillips curve would slope downward. 
A) money would not be neutral and the long-run Phillips curve would slope upward. 
B) money would not be neutral and the long-run Phillips curve would slope downward. 
C) money would be neutral and the long-run Phillips curve would slope upward. 
D) money would be neutral and the long-run Phillips curve would slope downward.

If inflation is less than expected, then the unemployment rate is

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

According to the Phillips curve, unemployment and inflation are positively related in

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

In 1980, the U.S. misery index was

If there is an adverse supply shock, then

In the long run, an increase in the money supply growth rate

Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

According to the long-run Phillips curve, in the long run monetary policy influences

If policymakers expand aggregate demand, then in the long run

Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

If an increase in inflation permanently reduced unemployment then,

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

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Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

If inflation is less than expected, then the unemployment rate is

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

According to the Phillips curve, unemployment and inflation are positively related in

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

In 1980, the U.S. misery index was

If there is an adverse supply shock, then

In the long run, an increase in the money supply growth rate

Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

According to the long-run Phillips curve, in the long run monetary policy influences

If policymakers expand aggregate demand, then in the long run

Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

If an increase in inflation permanently reduced unemployment then,

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

Filters