Question 1

According to the long-run Phillips curve,in the long run monetary policy influences

Accepted Answer

A)  both the inflation rate and the unemployment rate. 
B)  the inflation rate but not the unemployment rate. 
C)  the unemployment rate but not the inflation rate. 
D)  neither the unemployment rate nor the inflation rate. 
A)  both the inflation rate and the unemployment rate. 
B)  the inflation rate but not the unemployment rate. 
C)  the unemployment rate but not the inflation rate. 
D)  neither the unemployment rate nor the inflation rate.

Question 2

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

Accepted Answer

A)  Its position is determined primarily by monetary factors. 
B)  If it shifts right,long-run aggregate supply shifts right. 
C)  It cannot be changed by any government policy. 
D)  Its position depends on the natural rate of unemployment. 
A)  Its position is determined primarily by monetary factors. 
B)  If it shifts right,long-run aggregate supply shifts right. 
C)  It cannot be changed by any government policy. 
D)  Its position depends on the natural rate of unemployment.

Question 3

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 unemployment rate that the economy tends to move to in the long run. 
D)  depends 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 unemployment rate that the economy tends to move to in the long run. 
D)  depends on the rate at which the Fed increases the money supply.

Question 4

Refer to Monetary Policy in Southland.Suppose the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level.Suppose at first that the public thought inflation would only drop to 18%,but eventually become convinced that the inflation rate will stay at 12.5%.

Accepted Answer

A)  unemployment rises in the short run,and remains higher than it's original value in the long run. 
B)  unemployment rises in the short run,and is the same as it's original value in the long run. 
C)  unemployment falls in the short run,and is lower than it's original value in the long run. 
D)  unemployment falls in the short run,and is the same as it's original value in the long run. 
A)  unemployment rises in the short run,and remains higher than it's original value in the long run. 
B)  unemployment rises in the short run,and is the same as it's original value in the long run. 
C)  unemployment falls in the short run,and is lower than it's original value in the long run. 
D)  unemployment falls in the short run,and is the same as it's original value in the long run.

Question 5

Germany has a higher natural rate of unemployment than the United States.This suggests that

Accepted Answer

A)  Germany is at a higher point on its long-run Phillips curve and so has higher inflation than the United States. 
B)  Germany is at a lower point on its long-run Phillips curve and so has lower inflation than the United States. 
C)  Germany's Phillips curve is to the left of that of the United States,possibly because they have higher inflation. 
D)  Germany's Phillips curve is to the right of that of the United States,possibly because they have more generous unemployment compensation. 
A)  Germany is at a higher point on its long-run Phillips curve and so has higher inflation than the United States. 
B)  Germany is at a lower point on its long-run Phillips curve and so has lower inflation than the United States. 
C)  Germany's Phillips curve is to the left of that of the United States,possibly because they have higher inflation. 
D)  Germany's Phillips curve is to the right of that of the United States,possibly because they have more generous unemployment compensation.

Question 6

Which of the following explains the time-inconsistency of policy explained by Kydland and Prescott?

Accepted Answer

A)  A contractionary monetary policy will lead to higher unemployment in the short-run but not the long-run. 
B)  An expansionary monetary policy will lead to higher unemployment in the short-run but not the long-run. 
C)  Expected inflation is higher than otherwise if the public believes that policymakers will be tempted to raise inflation to reduce unemployment. 
D)  Expected inflation is lower than otherwise if the public believes that policymakers will be tempted to lower inflation to reduce unemployment. 
A)  A contractionary monetary policy will lead to higher unemployment in the short-run but not the long-run. 
B)  An expansionary monetary policy will lead to higher unemployment in the short-run but not the long-run. 
C)  Expected inflation is higher than otherwise if the public believes that policymakers will be tempted to raise inflation to reduce unemployment. 
D)  Expected inflation is lower than otherwise if the public believes that policymakers will be tempted to lower inflation to reduce unemployment.

Question 7

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher 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 8

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Accepted Answer

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

Question 9

Friedman argued that the Fed could use monetary policy to peg

Accepted Answer

A)  nominal exchange rates. 
B)  the level of real GDP. 
C)  the rate of unemployment. 
D)  None of the above is correct. 
A)  nominal exchange rates. 
B)  the level of real GDP. 
C)  the rate of unemployment. 
D)  None of the above is correct.

Question 10

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

Accepted Answer

A)  rises.As inflation expectations adjust,the short-run Phillips curve shifts right. 
B)  rises.As inflation expectations adjust,the short-run Phillips curve shifts left. 
C)  falls.As inflation expectations adjust,the short-run Phillips curve shifts right. 
D)  falls.As inflation expectations adjust,the short-run Phillips curve shifts left. 
A)  rises.As inflation expectations adjust,the short-run Phillips curve shifts right. 
B)  rises.As inflation expectations adjust,the short-run Phillips curve shifts left. 
C)  falls.As inflation expectations adjust,the short-run Phillips curve shifts right. 
D)  falls.As inflation expectations adjust,the short-run Phillips curve shifts left.

Question 11

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

Accepted Answer

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

Question 12

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 short run,an unexpected decrease in money supply growth moves the economy to

Accepted Answer

A)  A and 1. 
B)  B and 2. 
C)  back to C and 3. 
D)  D and 4. 
A)  A and 1. 
B)  B and 2. 
C)  back to C and 3. 
D)  D and 4.

Question 13

Friedman and Phelps believed that the natural rate of unemployment was constant.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A)  the short-run Phillips curve shifts left 
B)  unemployment falls 
C)  the price level rises 
D)  output rises. 
A)  the short-run Phillips curve shifts left 
B)  unemployment falls 
C)  the price level rises 
D)  output rises.

Question 15

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,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 16

An adverse supply shock will cause output

Accepted Answer

A)  and prices to rise. 
B)  and prices to fall. 
C)  to rise and prices to fall. 
D)  to fall and prices to rise. 
A)  and prices to rise. 
B)  and prices to fall. 
C)  to rise and prices to fall. 
D)  to fall and prices to rise.

Question 17

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Accepted Answer

A)  the inflation rate decreases. 
B)  the government increases its expenditures. 
C)  the Fed decreases the money supply. 
D)  None of the above is correct. 
A)  the inflation rate decreases. 
B)  the government increases its expenditures. 
C)  the Fed decreases the money supply. 
D)  None of the above is correct.

Question 18

Suppose that the money supply increases.In the short run this decreases unemployment 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 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 supply model. 
D)  the aggregate demand and aggregate supply model,but not the short-run Phillips curve.

Question 19

Figure 35-4
Use the graph below to answer the following questions.  
-Refer to Figure 35-4.Curve 1 is the

Accepted Answer

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

Question 20

There is a

Accepted Answer

A)  short-run tradeoff between inflation and unemployment. 
B)  short-run tradeoff between the actual unemployment rate and the natural rate of unemployment. 
C)  long-run tradeoff between inflation and unemployment. 
D)  long-run tradeoff between the actual unemployment rate and the natural rate of unemployment. 
A)  short-run tradeoff between inflation and unemployment. 
B)  short-run tradeoff between the actual unemployment rate and the natural rate of unemployment. 
C)  long-run tradeoff between inflation and unemployment. 
D)  long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.

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

According to the long-run Phillips curve,in the long run monetary policy influences

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

The natural rate of unemployment

Germany has a higher natural rate of unemployment than the United States.This suggests that

Which of the following explains the time-inconsistency of policy explained by Kydland and Prescott?

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

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Friedman argued that the Fed could use monetary policy to peg

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

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

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 short run,an unexpected decrease in money supply growth moves the economy to

Friedman and Phelps believed that the natural rate of unemployment was constant.

Which of the following would not be associated with a favorable supply shock?

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,in the long run the economy

An adverse supply shock will cause output

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Suppose that the money supply increases.In the short run this decreases unemployment according to

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.Curve 1 is the

There is 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

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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