Question 1

In the long run,a decrease in the money supply growth rate

Accepted Answer

A)  increases inflation and shifts the short-run Phillips curve right. 
B)  increases inflation and shifts the short-run Phillips curve left. 
C)  decreases inflation and shifts the short-run Philips curve right. 
D)  decreases inflation and shifts the short-run Phillips curve left. 
A)  increases inflation and shifts the short-run Phillips curve right. 
B)  increases inflation and shifts the short-run Phillips curve left. 
C)  decreases inflation and shifts the short-run Philips curve right. 
D)  decreases inflation and shifts the short-run Phillips curve left.

Question 2

According to the Phillips curve,policymakers could reduce both inflation and unemployment by

Accepted Answer

A)  increasing the money supply. 
B)  increasing government expenditures. 
C)  raising taxes. 
D)  None of the above is correct. 
A)  increasing the money supply. 
B)  increasing government expenditures. 
C)  raising taxes. 
D)  None of the above is correct.

Question 3

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Accepted Answer

In the long run the natural rate of unem

Question 4

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Accepted Answer

A)  both higher inflation and higher unemployment in the long run. 
B)  higher inflation and no change in unemployment in the long run. 
C)  the same inflation rate and lower unemployment in the long run. 
D)  higher inflation and lower unemployment in the long run 
A)  both higher inflation and higher unemployment in the long run. 
B)  higher inflation and no change in unemployment in the long run. 
C)  the same inflation rate and lower unemployment in the long run. 
D)  higher inflation and lower unemployment in the long run

Question 5

Friedman and Phelps argued that

Accepted Answer

A)  if peoples' inflation expectations were fixed,then an increase in the money supply growth rate could not change output in the short or long run. 
B)  if peoples' inflation expectations were fixed,then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D)  None of the above is correct. 
A)  if peoples' inflation expectations were fixed,then an increase in the money supply growth rate could not change output in the short or long run. 
B)  if peoples' inflation expectations were fixed,then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D)  None of the above is correct.

Question 6

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Accepted Answer

A) True 
 B)False

Question 7

An adverse supply shock causes the price level to

Accepted Answer

A)  rise.To counter this a central bank would increase the money supply. 
B)  rise.To counter this a central bank would decrease the money supply. 
C)  fall.To counter this a central bank would increase the money supply. 
D)  fall.To counter this a central bank would decrease the money supply. 
A)  rise.To counter this a central bank would increase the money supply. 
B)  rise.To counter this a central bank would decrease the money supply. 
C)  fall.To counter this a central bank would increase the money supply. 
D)  fall.To counter this a central bank would decrease the money supply.

Question 8

Figure 35-1.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 35-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Accepted Answer

A)  that applies both in the short run and in the long run. 
B)  that is relevant to choices involving fiscal policy,but not to choices involving monetary policy. 
C)  of inflation and unemployment. 
D)  All of the above are correct. 
A)  that applies both in the short run and in the long run. 
B)  that is relevant to choices involving fiscal policy,but not to choices involving monetary policy. 
C)  of inflation and unemployment. 
D)  All of the above are correct.

Question 9

Which of the following would cause the price level to fall and output to rise in the short run?

Accepted Answer

A)  an increase in the money supply 
B)  a decrease in the money supply 
C)  an adverse supply shock 
D)  a favorable supply shock 
A)  an increase in the money supply 
B)  a decrease in the money supply 
C)  an adverse supply shock 
D)  a favorable supply shock

Question 10

Other things the same,an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Accepted Answer

A) True 
 B)False

Question 11

When they are confronted with an adverse shock to aggregate supply,policymakers face a difficult choice in that

Accepted Answer

A)  if they contract aggregate demand,the unemployment rate will increase further. 
B)  if they expand aggregate demand,the inflation rate will increase further. 
C)  they face a less favorable trade-off between inflation and unemployment than they did before the shock. 
D)  All of the above are correct. 
A)  if they contract aggregate demand,the unemployment rate will increase further. 
B)  if they expand aggregate demand,the inflation rate will increase further. 
C)  they face a less favorable trade-off between inflation and unemployment than they did before the shock. 
D)  All of the above are correct.

Question 12

During the mid and last part of the 1990's both inflation and unemployment were low.In general this could have been the result of

Accepted Answer

A)  adverse supply shocks that shifted the short-run Phillips curve left. 
B)  adverse supply shocks that shifted the short-run Phillips curve right. 
C)  favorable supply shocks that shifted the short-run Phillips curve left. 
D)  favorable supply shocks that shifted the short-run Phillips curve right. 
A)  adverse supply shocks that shifted the short-run Phillips curve left. 
B)  adverse supply shocks that shifted the short-run Phillips curve right. 
C)  favorable supply shocks that shifted the short-run Phillips curve left. 
D)  favorable supply shocks that shifted the short-run Phillips curve right.

Question 13

In the long run,a decrease in the money supply growth rate

Accepted Answer

A)  shifts both the long-run and the short-run Phillips curves right. 
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D)  None of the above is correct. 
A)  shifts both the long-run and the short-run Phillips curves right. 
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D)  None of the above is correct.

Question 14

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same,then policymakers

Accepted Answer

A)  can not exploit a tradeoff between inflation and unemployment in either the short or long run. 
B)  can exploit a tradeoff between inflation and unemployment in the short run but not in the long run. 
C)  can exploit a tradeoff between inflation and unemployment in both the short run and the long run. 
D)  can exploit a tradeoff between inflation and unemployment in the long run,but not the short run. 
A)  can not exploit a tradeoff between inflation and unemployment in either the short or long run. 
B)  can exploit a tradeoff between inflation and unemployment in the short run but not in the long run. 
C)  can exploit a tradeoff between inflation and unemployment in both the short run and the long run. 
D)  can exploit a tradeoff between inflation and unemployment in the long run,but not the short run.

Question 15

If the central bank decreases the money supply,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 16

The short-run relationship between inflation and unemployment is often called

Accepted Answer

A)  the Classical Dichotomy. 
B)  Money Neutrality. 
C)  the Phillips curve. 
D)  None of the above is correct. 
A)  the Classical Dichotomy. 
B)  Money Neutrality. 
C)  the Phillips curve. 
D)  None of the above is correct.

Question 17

Contractionary monetary policy

Accepted Answer

A)  leads to disinflation and makes the short-run Phillips curve shift right. 
B)  leads to disinflation and makes the short-run Phillips curve shift left. 
C)  does not lead to disinflation but makes the short-run Phillips curve shift right. 
D)  does not lead to disinflation but makes the short-run Phillips curve shift left. 
A)  leads to disinflation and makes the short-run Phillips curve shift right. 
B)  leads to disinflation and makes the short-run Phillips curve shift left. 
C)  does not lead to disinflation but makes the short-run Phillips curve shift right. 
D)  does not lead to disinflation but makes the short-run Phillips curve shift left.

Question 18

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is lower in

Accepted Answer

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

Question 19

The misery index is supposed to measure the

Accepted Answer

A)  social cost of unemployment. 
B)  health of the economy. 
C)  lost output associated with a particular unemployment rate. 
D)  short-run tradeoff between inflation and unemployment. 
A)  social cost of unemployment. 
B)  health of the economy. 
C)  lost output associated with a particular unemployment rate. 
D)  short-run tradeoff between inflation and unemployment.

Question 20

Which of the following is correct if there is a favorable supply shock?

Accepted Answer

A)  the short-run aggregate supply curve and the short-run Phillips curve both shift right. 
B)  the short-run aggregate supply curve and the short-run Phillips curve both shift left. 
C)  the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. 
D)  the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right. 
A)  the short-run aggregate supply curve and the short-run Phillips curve both shift right. 
B)  the short-run aggregate supply curve and the short-run Phillips curve both shift left. 
C)  the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. 
D)  the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

In the long run,a decrease in the money supply growth rate

According to the Phillips curve,policymakers could reduce both inflation and unemployment by

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Friedman and Phelps argued that

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

An adverse supply shock causes the price level to

Figure 35-1.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 35-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Which of the following would cause the price level to fall and output to rise in the short run?

Other things the same,an increase in aggregate demand reduces unemployment and raises inflation in the short run.

When they are confronted with an adverse shock to aggregate supply,policymakers face a difficult choice in that

During the mid and last part of the 1990's both inflation and unemployment were low.In general this could have been the result of

In the long run,a decrease in the money supply growth rate

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same,then policymakers

If the central bank decreases the money supply,then in the short run prices

The short-run relationship between inflation and unemployment is often called

Contractionary monetary policy

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is lower in

The misery index is supposed to measure the

Which of the following is correct if there is a favorable supply shock?

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Five Debates Over Macroeconomic Policy

Filters