Question 1

Moving from the late 1960s to 1970-1973

Accepted Answer

A)  inflation remained high while the unemployment rate was lower than in the late 1960s. 
B)  inflation remained high while the unemployment rate was higher than in the late 1960s. 
C)  inflation remained low while the unemployment rate was lower than in the late 1960s. 
D)  inflation remained low while the unemployment rate was higher than in the late 1960s. 
A)  inflation remained high while the unemployment rate was lower than in the late 1960s. 
B)  inflation remained high while the unemployment rate was higher than in the late 1960s. 
C)  inflation remained low while the unemployment rate was lower than in the late 1960s. 
D)  inflation remained low while the unemployment rate was higher than in the late 1960s.

Question 2

Figure 35-5
Use the two graphs in the diagram to answer the following questions.    
-Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

Accepted Answer

A)  A and 1. 
B)  back to C and 3. 
C)  D and 4. 
D)  F and 5. 
A)  A and 1. 
B)  back to C and 3. 
C)  D and 4. 
D)  F and 5.

Question 3

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)  reduced both unemployment and inflation. 
B)  reduced inflation significantly,but at the cost of a severe recession. 
C)  reduced unemployment significantly,but at the cost of higher inflation. 
D)  raised both unemployment and inflation. 
A)  reduced both unemployment and inflation. 
B)  reduced inflation significantly,but at the cost of a severe recession. 
C)  reduced unemployment significantly,but at the cost of higher inflation. 
D)  raised both unemployment and inflation.

Question 4

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 5

The large increase in oil prices in the 1970s was caused primarily by a(n)

Accepted Answer

A)  increase in demand for oil. 
B)  decrease in demand for oil. 
C)  decrease in the supply of oil. 
D)  increase in the supply of oil. 
A)  increase in demand for oil. 
B)  decrease in demand for oil. 
C)  decrease in the supply of oil. 
D)  increase in the supply of oil.

Question 6

In the long run an increase 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 7

From 1993-2001 the U.S.economy experienced

Accepted Answer

A)  relatively low inflation and unemployment rates. 
B)  relatively high inflation and unemployment rates. 
C)  relatively low inflation rates and relatively high unemployment rates. 
D)  relatively high inflation rates and relatively low unemployment rates. 
A)  relatively low inflation and unemployment rates. 
B)  relatively high inflation and unemployment rates. 
C)  relatively low inflation rates and relatively high unemployment rates. 
D)  relatively high inflation rates and relatively low unemployment rates.

Question 8

The short-run Phillips curve shows the combinations of

Accepted Answer

A)  unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve. 
B)  unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve. 
C)  real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve. 
D)  None of the above is correct. 
A)  unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve. 
B)  unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve. 
C)  real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve. 
D)  None of the above is correct.

Question 9

Figure 35-6
Use this graph to answer the questions below.  
-Refer to figure 35-6.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 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A favorable supply shock will cause

Accepted Answer

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

Question 13

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 14

Suppose that the money supply increases.In the short run,this increases prices according to

Accepted Answer

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

Question 15

Figure 35-4
Use the graph below to answer the following questions.  
-Refer to Figure 35-4.Curve 2 is the

Accepted Answer

A)  long-run Phillips curve. 
B)  short-run Phillips curve. 
C)  long-run aggregate demand curve. 
D)  short-run aggregate demand curve. 
A)  long-run Phillips curve. 
B)  short-run Phillips curve. 
C)  long-run aggregate demand curve. 
D)  short-run aggregate demand curve.

Question 16

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.The short-run effects of the housing and financial crisis are shown by

Accepted Answer

A)  moving to the right along the short-run Phillips curve. 
B)  moving to the left along the short-run Phillips curve. 
C)  shifting the short-run Phillips curve right. 
D)  shifting the short-run Phillips curve left. 
A)  moving to the right along the short-run Phillips curve. 
B)  moving to the left along the short-run Phillips curve. 
C)  shifting the short-run Phillips curve right. 
D)  shifting the short-run Phillips curve left.

Question 17

In his famous article published in an economics journal in 1958,A.W.Phillips

Accepted Answer

A)  used data for the United States to show a negative relationship between the rate of change of the U.S.consumer price index and the U.S.unemployment rate. 
B)  used data for the United States to show a negative relationship between the rate of change of wages in the U.S.and the U.S.unemployment rate. 
C)  used data for the United Kingdom to show a negative relationship between the rate of change of the U.K.consumer price index and the U.K.unemployment rate. 
D)  used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K.and the U.K.unemployment rate. 
A)  used data for the United States to show a negative relationship between the rate of change of the U.S.consumer price index and the U.S.unemployment rate. 
B)  used data for the United States to show a negative relationship between the rate of change of wages in the U.S.and the U.S.unemployment rate. 
C)  used data for the United Kingdom to show a negative relationship between the rate of change of the U.K.consumer price index and the U.K.unemployment rate. 
D)  used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K.and the U.K.unemployment rate.

Question 18

Figure 35-6
Use this graph to answer the questions below.  
-Refer to figure 35-6.If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy,in the short run the economy moves to

Accepted Answer

A)  3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
B)  3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
C)  7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
D)  7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
A)  3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
B)  3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
C)  7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
D)  7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.

Question 19

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

Moving from the late 1960s to 1970-1973

Figure 35-5 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

The restrictive monetary policy followed by the Fed in the early 1980s

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

The large increase in oil prices in the 1970s was caused primarily by a(n)

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

From 1993-2001 the U.S.economy experienced

The short-run Phillips curve shows the combinations of

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

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

A favorable supply shock will cause

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

Suppose that the money supply increases.In the short run,this increases prices according to

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.Curve 2 is the

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.The short-run effects of the housing and financial crisis are shown by

In his famous article published in an economics journal in 1958,A.W.Phillips

Figure 35-6 Use this graph to answer the questions below. -Refer to figure 35-6.If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy,in the short run the economy moves to

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

The natural rate of unemployment

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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