Question 1

If the government raises government expenditures, then in the short run prices

Accepted Answer

A) rise and unemployment falls. 
B) fall and unemployment rises. 
C) and unemployment rise. 
D) and unemployment fall. 
A) rise and unemployment falls. 
B) fall and unemployment rises. 
C) and unemployment rise. 
D) and unemployment fall.

Question 2

An adverse supply shock causes inflation to

Accepted Answer

A) rise and the short-run Phillips curve to shift right. 
B) rise and the short-run Phillips curve to shift left. 
C) fall and the short-run Phillips curve to shift right. 
D) fall and the short-run Phillips curve to shift left. 
A) rise and the short-run Phillips curve to shift right. 
B) rise and the short-run Phillips curve to shift left. 
C) fall and the short-run Phillips curve to shift right. 
D) fall and the short-run Phillips curve to shift left.

Question 3

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Accepted Answer

A) unemployment equals the natural rate and expected inflation equals actual inflation. 
B) unemployment is above the natural rate and expected inflation equals actual inflation. 
C) unemployment equals the natural rate and expected inflation is greater than actual inflation. 
D) None of the above is necessarily correct. 
A) unemployment equals the natural rate and expected inflation equals actual inflation. 
B) unemployment is above the natural rate and expected inflation equals actual inflation. 
C) unemployment equals the natural rate and expected inflation is greater than actual inflation. 
D) None of the above is necessarily correct.

Question 4

If a central bank decreases 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

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A) the unemployment rate will be below its natural rate whenever inflation is negative. 
B) the unemployment rate will be below its natural rate whenever inflation is positive. 
C) the unemployment rate will be below its natural rate only if inflation is less than expected. 
D) the unemployment rate will be below its natural rate only if inflation is greater than expected. 
A) the unemployment rate will be below its natural rate whenever inflation is negative. 
B) the unemployment rate will be below its natural rate whenever inflation is positive. 
C) the unemployment rate will be below its natural rate only if inflation is less than expected. 
D) the unemployment rate will be below its natural rate only if inflation is greater than expected.

Question 6

A favorable supply shock will shift short-run aggregate supply

Accepted Answer

A) left, making output rise. 
B) left, making output fall. 
C) right, making output rise. 
D) right, making output fall. 
A) left, making output rise. 
B) left, making output fall. 
C) right, making output rise. 
D) right, making output fall.

Question 7

The short-run Phillips curve intersects the long-run Phillips curve where

Accepted Answer

A) the actual rate of inflation equals the expected rate of inflation. 
B) the actual rate of unemployment equals the natural rate of unemployment. 
C) Both A and B are correct. 
D) None of the above is correct. 
A) the actual rate of inflation equals the expected rate of inflation. 
B) the actual rate of unemployment equals the natural rate of unemployment. 
C) Both A and B are correct. 
D) None of the above is correct.

Question 8

In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

Accepted Answer

A) raised unemployment and inflation. 
B) raised unemployment and reduced inflation. 
C) reduced unemployment and raised inflation. 
D) reduced unemployment and inflation. 
A) raised unemployment and inflation. 
B) raised unemployment and reduced inflation. 
C) reduced unemployment and raised inflation. 
D) reduced unemployment and inflation.

Question 9

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Accepted Answer

A) an increase in both the inflation rate and the unemployment rate. 
B) an increase in the inflation rate and a reduction in the unemployment rate. 
C) no change in either the inflation rate or the unemployment rate. 
D) an increase in the inflation rate and no change in the unemployment rate. 
A) an increase in both the inflation rate and the unemployment rate. 
B) an increase in the inflation rate and a reduction in the unemployment rate. 
C) no change in either the inflation rate or the unemployment rate. 
D) an increase in the inflation rate and no change in the unemployment rate.

Question 10

In the long run a reduction in the money supply growth rate affects

Accepted Answer

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

Question 11

Suppose that money supply growth increases. In the long run, this increases employment according to

Accepted Answer

A) both the long-run Phillips curve and the aggregate demand and aggregate supply model. 
B) neither the long-run Phillips curve nor the aggregate demand and aggregate supply model. 
C) the long-run Phillips curve, but not the aggregate demand and aggregate supply model. 
D) the aggregate demand and aggregate supply model, but not the long-run Phillips curve 
A) both the long-run Phillips curve and the aggregate demand and aggregate supply model. 
B) neither the long-run Phillips curve nor the aggregate demand and aggregate supply model. 
C) the long-run Phillips curve, but not the aggregate demand and aggregate supply model. 
D) the aggregate demand and aggregate supply model, but not the long-run Phillips curve

Question 12

Figure 22-5
Use the graph below to answer the following questions.  
-Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Accepted Answer

A) stays at C. 
B) moves to B. 
C) moves to F. 
D) None of the above is consistent wit an increase in the money supply growth rate. 
A) stays at C. 
B) moves to B. 
C) moves to F. 
D) None of the above is consistent wit an increase in the money supply growth rate.

Question 13

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Accepted Answer

A) aggregate demand to the right. 
B) aggregate demand to the left. 
C) aggregate supply to the right. 
D) aggregate supply to the left. 
A) aggregate demand to the right. 
B) aggregate demand to the left. 
C) aggregate supply to the right. 
D) aggregate supply to the left.

Question 14

If efficiency wages became more common,

Accepted Answer

A) both the long-run Phillips curve and the long-run aggregate supply curve would shift right. 
B) both the long-run Phillips curve and the long-run aggregate supply curve would shift left. 
C) the long-run Phillips curve would shift right, and the long-run aggregate supply curve would shift left. 
D) the long-run Phillips curve would shift left, and the long-run aggregate supply curve would shift right. 
A) both the long-run Phillips curve and the long-run aggregate supply curve would shift right. 
B) both the long-run Phillips curve and the long-run aggregate supply curve would shift left. 
C) the long-run Phillips curve would shift right, and the long-run aggregate supply curve would shift left. 
D) the long-run Phillips curve would shift left, and the long-run aggregate supply curve would shift right.

Question 15

According to the Phillips curve, unemployment and inflation are negatively 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 16

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Accepted Answer

A) True 
 B)False

Question 17

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Accepted Answer

A) low, so there was upward pressure on wages and prices. 
B) low, so there was downward pressure on wages and prices. 
C) high, so there was upward pressure on wages and prices. 
D) high, so there was downward pressure on wages and prices. 
A) low, so there was upward pressure on wages and prices. 
B) low, so there was downward pressure on wages and prices. 
C) high, so there was upward pressure on wages and prices. 
D) high, so there was downward pressure on wages and prices.

Question 18

One determinant of the natural rate of unemployment is the

Accepted Answer

A) rate of growth of the money supply. 
B) minimum wage rate. 
C) expected inflation rate. 
D) All of the above are correct. 
A) rate of growth of the money supply. 
B) minimum wage rate. 
C) expected inflation rate. 
D) All of the above are correct.

Question 19

The natural rate of unemployment

Accepted Answer

A) is constant over time. 
B) varies over time, but can't be changed by the government. 
C) is the socially desirable rate of unemployment. 
D) does not depend on the rate at which the Fed increases the money supply. 
A) is constant over time. 
B) varies over time, but can't be changed by the government. 
C) is the socially desirable rate of unemployment. 
D) does not depend on the rate at which the Fed increases the money supply.

Question 20

Phillips found a

Accepted Answer

A) positive relation between unemployment and inflation in the United Kingdom. 
B) positive relation between unemployment and inflation in the United States. 
C) negative relation between unemployment and inflation in the United States. 
D) negative relation between unemployment and inflation in the United Kingdom. 
A) positive relation between unemployment and inflation in the United Kingdom. 
B) positive relation between unemployment and inflation in the United States. 
C) negative relation between unemployment and inflation in the United States. 
D) negative relation between unemployment and inflation in the United Kingdom.

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

If the government raises government expenditures, then in the short run prices

An adverse supply shock causes inflation to

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

If a central bank decreases 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?

According to Friedman and Phelps's analysis of the Phillips curve,

A favorable supply shock will shift short-run aggregate supply

The short-run Phillips curve intersects the long-run Phillips curve where

In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

In the long run a reduction in the money supply growth rate affects

Suppose that money supply growth increases. In the long run, this increases employment according to

Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, in the long run the economy

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

If efficiency wages became more common,

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

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

One determinant of the natural rate of unemployment is the

The natural rate of unemployment

Phillips found a

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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