Question 1

Which of the following describes the Volcker disinflation most accurately?

Accepted Answer

A)  Almost all of the public believed that the Fed would keep money growth low,so unemployment rose less than it would have otherwise. 
B)  Almost all of the public believed that the Fed would keep money growth low,so unemployment rose more than it would have otherwise. 
C)  Much of the public did not believe that the Fed would keep money growth low,so unemployment rose less than it would have otherwise. 
D)  Much of the public did not believe that the Fed would keep money growth low,so unemployment rose more than it would have otherwise. 
A)  Almost all of the public believed that the Fed would keep money growth low,so unemployment rose less than it would have otherwise. 
B)  Almost all of the public believed that the Fed would keep money growth low,so unemployment rose more than it would have otherwise. 
C)  Much of the public did not believe that the Fed would keep money growth low,so unemployment rose less than it would have otherwise. 
D)  Much of the public did not believe that the Fed would keep money growth low,so unemployment rose more than it would have otherwise.

Question 2

If people believe that the central bank is going to reduce inflation

Accepted Answer

A)  the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B)  the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C)  the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D)  the short-run Phillips curve shifts left and the sacrifice ratio will fall. 
A)  the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B)  the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C)  the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D)  the short-run Phillips curve shifts left and the sacrifice ratio will fall.

Question 3

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Accepted Answer

A)  Bureau of the Budget. 
B)  Bureau of Labor Statistics. 
C)  Department of the Treasury. 
D)  President's Council of Economic Advisors. 
A)  Bureau of the Budget. 
B)  Bureau of Labor Statistics. 
C)  Department of the Treasury. 
D)  President's Council of Economic Advisors.

Question 4

In the early 1970s,the short-run Phillips curve shifted

Accepted Answer

A)  right as inflation expectations rose. 
B)  right as inflation expectations fell. 
C)  left as inflation expectations rose. 
D)  left as inflation expectations fell. 
A)  right as inflation expectations rose. 
B)  right as inflation expectations fell. 
C)  left as inflation expectations rose. 
D)  left as inflation expectations fell.

Question 5

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 6

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

A)  should not see an increase in the unemployment rate even in the short run. 
B)  will having rising unemployment for a while,but then return to the natural rate of unemployment. 
C)  will have a permanently higher unemployment rate. 
D)  None of the above is suggested by the arguments of Friedman and Phelps. 
A)  should not see an increase in the unemployment rate even in the short run. 
B)  will having rising unemployment for a while,but then return to the natural rate of unemployment. 
C)  will have a permanently higher unemployment rate. 
D)  None of the above is suggested by the arguments of Friedman and Phelps.

Question 7

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate.How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

Accepted Answer

If unemployment is above its natural rat

Question 8

Which of the following is disinflation?

Accepted Answer

A)  prices stay the same. 
B)  prices fall. 
C)  prices rise at a slower rate than they used to. 
D)  prices rise as a faster rate than they used to. 
A)  prices stay the same. 
B)  prices fall. 
C)  prices rise at a slower rate than they used to. 
D)  prices rise as a faster rate than they used to.

Question 9

Which of the following is correct according to the long-run Phillips curve?

Accepted Answer

A)  No government policy,including changes in monetary growth,can change the natural rate of unemployment. 
B)  Changes in the money supply growth rate is the only government policy that can change the natural rate of unemployment. 
C)  Monetary policy cannot change the natural rate of unemployment,but other government policies can. 
D)  Monetary policy and other government policies can both change the natural rate of unemployment. 
A)  No government policy,including changes in monetary growth,can change the natural rate of unemployment. 
B)  Changes in the money supply growth rate is the only government policy that can change the natural rate of unemployment. 
C)  Monetary policy cannot change the natural rate of unemployment,but other government policies can. 
D)  Monetary policy and other government policies can both change the natural rate of unemployment.

Question 10

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 housing and financial crises

Accepted Answer

A)  raises both the price level and output. 
B)  raises the price level and reduces output. 
C)  reduces the price level and raises output. 
D)  reduces both the price level and output. 
A)  raises both the price level and output. 
B)  raises the price level and reduces output. 
C)  reduces the price level and raises output. 
D)  reduces both the price level and output.

Question 11

Figure 35-4
Use the graph below to answer the following questions.  
-Refer to Figure 35-4.If the economy starts at C and the money supply growth rate increases,then in the short run the economy moves to

Accepted Answer

A)  B. 
B)  D. 
C)  F. 
D)  None of the above is consistent with an increase in the money supply growth rate. 
A)  B. 
B)  D. 
C)  F. 
D)  None of the above is consistent with an increase in the money supply growth rate.

Question 12

A movement to the left along a given short-run Phillips curve could be caused by

Accepted Answer

A)  a reduction in the natural rate of unemployment or expansionary monetary policy. 
B)  expansionary monetary policy,but not a reduction in the natural rate of unemployment. 
C)  either a reduction in the natural rate of unemployment or a contractionary monetary policy. 
D)  contractionary monetary policy,but not a reduction in the natural rate of unemployment. 
A)  a reduction in the natural rate of unemployment or expansionary monetary policy. 
B)  expansionary monetary policy,but not a reduction in the natural rate of unemployment. 
C)  either a reduction in the natural rate of unemployment or a contractionary monetary policy. 
D)  contractionary monetary policy,but not a reduction in the natural rate of unemployment.

Question 13

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government,then which,if any,curve(s)shift left?

Accepted Answer

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

Question 14

Which of the following shifts aggregate supply to the right?

Accepted Answer

A)  a decline in the price of imported natural resources 
B)  a technological advance 
C)  an older labor force that leaves jobs less frequently 
D)  All of the above are correct. 
A)  a decline in the price of imported natural resources 
B)  a technological advance 
C)  an older labor force that leaves jobs less frequently 
D)  All of the above are correct.

Question 15

In 1980,the U.S.economy had an inflation rate of

Accepted Answer

A)  about 1 percent and an unemployment rate of about 7 percent. 
B)  less than 4 percent and an unemployment rate of less than 6 percent. 
C)  less than 7 percent and an unemployment rate of about 9 percent. 
D)  more than 9 percent and an unemployment rate of about 7 percent. 
A)  about 1 percent and an unemployment rate of about 7 percent. 
B)  less than 4 percent and an unemployment rate of less than 6 percent. 
C)  less than 7 percent and an unemployment rate of about 9 percent. 
D)  more than 9 percent and an unemployment rate of about 7 percent.

Question 16

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 taxes moves the economy to

Accepted Answer

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

Question 17

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 18

If policymakers decrease aggregate demand,then in the long run

Accepted Answer

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

Question 19

In the long run,policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level. 
B)  neither unemployment nor the price level. 
C)  only unemployment. 
D)  only the price level. 
A)  both unemployment and the price level. 
B)  neither unemployment nor the price level. 
C)  only unemployment. 
D)  only the price level.

Question 20

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%.Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%.Then

Accepted Answer

A)  unemployment falls,but it would have fallen less if people had been expecting 12.5% inflation. 
B)  unemployment falls,but it would have fallen less if people had been expecting 25% inflation. 
C)  unemployment rises,but it would have risen less if people had been expecting 12.5% inflation. 
D)  unemployment rises,but it would have risen less if people had been expecting 25% inflation. 
A)  unemployment falls,but it would have fallen less if people had been expecting 12.5% inflation. 
B)  unemployment falls,but it would have fallen less if people had been expecting 25% inflation. 
C)  unemployment rises,but it would have risen less if people had been expecting 12.5% inflation. 
D)  unemployment rises,but it would have risen less if people had been expecting 25% inflation.

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

Which of the following describes the Volcker disinflation most accurately?

If people believe that the central bank is going to reduce inflation

Closely watched indicators such as the inflation rate and unemployment are released each month by the

In the early 1970s,the short-run Phillips curve shifted

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

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate.How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

Which of the following is disinflation?

Which of the following is correct according to the long-run Phillips curve?

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 housing and financial crises

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.If the economy starts at C and the money supply growth rate increases,then in the short run the economy moves to

A movement to the left along a given short-run Phillips curve could be caused by

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government,then which,if any,curve(s)shift left?

Which of the following shifts aggregate supply to the right?

In 1980,the U.S.economy had an inflation rate of

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 taxes moves the economy to

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

If policymakers decrease aggregate demand,then in the long run

In the long run,policy that changes aggregate demand changes

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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