Question 1

Proponents of rational expectations argued that the sacrifice ratio

Accepted Answer

A)  could be high because it was rational for people not to immediately change their expectations. 
B)  could be high because people might adjust their expectations quickly if they found anti-inflation policy credible. 
C)  could be low because it was rational for people not to immediately change their expectations. 
D)  could be low because people might adjust their expectations quickly if they found anti-inflation policy credible. 
A)  could be high because it was rational for people not to immediately change their expectations. 
B)  could be high because people might adjust their expectations quickly if they found anti-inflation policy credible. 
C)  could be low because it was rational for people not to immediately change their expectations. 
D)  could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.

Question 2

If inflation expectations rise,the short-run Phillips curve shifts

Accepted Answer

A)  right,so that at any inflation rate unemployment is higher in the short run than before. 
B)  left,so that at any inflation rate unemployment is higher in the short run than before. 
C)  right,so that at any inflation rate unemployment is lower in the short run than before. 
D)  left,so that at any inflation rate unemployment is lower in the short run than before. 
A)  right,so that at any inflation rate unemployment is higher in the short run than before. 
B)  left,so that at any inflation rate unemployment is higher in the short run than before. 
C)  right,so that at any inflation rate unemployment is lower in the short run than before. 
D)  left,so that at any inflation rate unemployment is lower in the short run than before.

Question 3

Which of the following would shift the long-run Phillips curve right?

Accepted Answer

A)  expansionary fiscal policy 
B)  an increase in the inflation rate 
C)  increases in unemployment compensation 
D)  None of the above is correct. 
A)  expansionary fiscal policy 
B)  an increase in the inflation rate 
C)  increases in unemployment compensation 
D)  None of the above is correct.

Question 4

If the long-run Phillips curve shifts to the left,then for any given rate of money growth and inflation the economy has

Accepted Answer

A)  higher unemployment and lower output. 
B)  higher unemployment and higher output. 
C)  lower unemployment and lower output. 
D)  lower unemployment and higher output. 
A)  higher unemployment and lower output. 
B)  higher unemployment and higher output. 
C)  lower unemployment and lower output. 
D)  lower unemployment and higher output.

Question 5

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.Assuming the price level in the previous year was 100,point F on the right-hand graph corresponds to

Accepted Answer

A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph. 
A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph.

Question 6

Figure
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 impacting the economy.
-Refer to The Economy in 2008.In the short run the increased prices of world commodities

Accepted Answer

A)  raise both the price level and output. 
B)  raise the price level and reduce output. 
C)  reduce the price level and raise output. 
D)  reduce both the price level and output. 
A)  raise both the price level and output. 
B)  raise the price level and reduce output. 
C)  reduce the price level and raise output. 
D)  reduce both the price level and output.

Question 7

The experience of the Volcker disinflation of the early 1980s

Accepted Answer

A)  generally increased estimates of the sacrifice ratio. 
B)  generally decreased estimates of the sacrifice ratio. 
C)  clearly refuted the predictions of the proponents of rational expectations. 
D)  clearly refuted the predictions of the opponents of rational expectations. 
A)  generally increased estimates of the sacrifice ratio. 
B)  generally decreased estimates of the sacrifice ratio. 
C)  clearly refuted the predictions of the proponents of rational expectations. 
D)  clearly refuted the predictions of the opponents of rational expectations.

Question 8

An event that directly affects firms' costs of production and thus the prices they charge is called

Accepted Answer

A)  a Phillips contraction. 
B)  an inflationary spiral. 
C)  a demand shock. 
D)  a supply shock. 
A)  a Phillips contraction. 
B)  an inflationary spiral. 
C)  a demand shock. 
D)  a supply shock.

Question 9

If the Fed were to increase the money supply,inflation would increase and unemployment would decrease in the short run.

Accepted Answer

A) True 
 B)False

Question 10

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by one percentage point.

Accepted Answer

A) True 
 B)False

Question 11

In the long run,the inflation rate depends primarily on the growth rate of the money supply..

Accepted Answer

A) True 
 B)False

Question 12

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

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 13

Figure 35-3   Refer to figure 35-3.In this order,which curve is a long-run Phillips curve and which is a short-run Phillips curve?
a.
A,B
b.
A,D
c.
C,B
d.
None of the above is correct.
ANS: B DIF: 1 REF: 35-2 NAT: Analytic
LOC: Unemployment and inflation TOP: Short-run Phillips curve | Long-run Phillips curve
MSC: Definitional
-Which of the following is upward sloping?

Accepted Answer

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

Question 14

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.What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)  the wage rate 
B)  the inflation rate 
C)  employment 
D)  output 
A)  the wage rate 
B)  the inflation rate 
C)  employment 
D)  output

Question 15

Which of the following would reduce the natural rate of unemployment?

Accepted Answer

A)  both an increase in the rate of money growth and increased unemployment compensation 
B)  an increase in the rate of money growth but not increased unemployment compensation 
C)  an increase in unemployment compensation but not an increase in the rate of money growth. 
D)  neither an increase in unemployment compensation nor an increase in the rate of money growth. 
A)  both an increase in the rate of money growth and increased unemployment compensation 
B)  an increase in the rate of money growth but not increased unemployment compensation 
C)  an increase in unemployment compensation but not an increase in the rate of money growth. 
D)  neither an increase in unemployment compensation nor an increase in the rate of money growth.

Question 16

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 17

Figure 35-2
Use the pair of diagrams below to answer the following questions.    
-Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,a decrease in the money supply moves the economy to

Accepted Answer

A)  E and 1. 
B)  D and 2. 
C)  D and 3. 
D)  None of the above is correct. 
A)  E and 1. 
B)  D and 2. 
C)  D and 3. 
D)  None of the above is correct.

Question 18

If policymakers decrease aggregate demand,then in the short run the price level

Accepted Answer

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

Question 19

In the long run,if the Fed decreases the rate at which it increases the money supply,

Accepted Answer

A)  inflation will be lower. 
B)  unemployment will be higher. 
C)  real GDP will be lower. 
D)  All of the above are correct. 
A)  inflation will be lower. 
B)  unemployment will be higher. 
C)  real GDP will be lower. 
D)  All of the above are correct.

Question 20

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.Assuming the price level in the previous year was 100,point G on the right-hand graph corresponds to

Accepted Answer

A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph. 
A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph.

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

Proponents of rational expectations argued that the sacrifice ratio

If inflation expectations rise,the short-run Phillips curve shifts

Which of the following would shift the long-run Phillips curve right?

If the long-run Phillips curve shifts to the left,then for any given rate of money growth and inflation the economy has

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.Assuming the price level in the previous year was 100,point F on the right-hand graph corresponds to

Figure 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 impacting the economy. -Refer to The Economy in 2008.In the short run the increased prices of world commodities

The experience of the Volcker disinflation of the early 1980s

An event that directly affects firms' costs of production and thus the prices they charge is called

If the Fed were to increase the money supply,inflation would increase and unemployment would decrease in the short run.

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by one percentage point.

In the long run,the inflation rate depends primarily on the growth rate of the money supply..

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

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.What is measured along the horizontal axis of the left-hand graph?

Which of the following would reduce the natural rate of unemployment?

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,a decrease in the money supply moves the economy to

If policymakers decrease aggregate demand,then in the short run the price level

In the long run,if the Fed decreases the rate at which it increases the money supply,

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.Assuming the price level in the previous year was 100,point G on the right-hand graph corresponds to

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

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