Question 1

How does the short-run Phillips curve model reflect an increase in the expected inflation?

Accepted Answer

A)  as a downward shift in the short-run Phillips curve 
B)  as an upward shift in the short-run Phillips curve 
C)  as a downward movement along the short-run Phillips curve 
D)  as an upward movement along the short-run Phillips curve 
A)  as a downward shift in the short-run Phillips curve 
B)  as an upward shift in the short-run Phillips curve 
C)  as a downward movement along the short-run Phillips curve 
D)  as an upward movement along the short-run Phillips curve

Question 2

Figure 16-3  
-Refer to the Figure 16-3.Starting from c and 3,where does an increase in aggregate demand move the economy to,in the short run and the long run?

Accepted Answer

A)  a and 1 in the short run,b and 2 in the long run 
B)  b and 2 in the short run,a and 1 in the long run 
C)  d and 4 in the short run,e and 5 in the long run 
D)  d and 2 in the short run,a and 5 in the long run 
A)  a and 1 in the short run,b and 2 in the long run 
B)  b and 2 in the short run,a and 1 in the long run 
C)  d and 4 in the short run,e and 5 in the long run 
D)  d and 2 in the short run,a and 5 in the long run

Question 3

A vertical long-run Phillips curve is consistent with which of the following?

Accepted Answer

A)  the principle of monetary neutrality 
B)  unemployment depends on money growth 
C)  a natural rate of unemployment that depends on the inflation rate 
D)  a downward-sloping aggregate-demand curve 
A)  the principle of monetary neutrality 
B)  unemployment depends on money growth 
C)  a natural rate of unemployment that depends on the inflation rate 
D)  a downward-sloping aggregate-demand curve

Question 4

What did Friedman and Phelps argue about the relationship between inflation and unemployment?

Accepted Answer

A)  The inflation rate is related to unemployment in the long-run. 
B)  The inflation rate is unrelated to unemployment in the long-run. 
C)  The inflation rate is related to unemployment in the short-run. 
D)  The inflation rate is unrelated to unemployment in the short-run. 
A)  The inflation rate is related to unemployment in the long-run. 
B)  The inflation rate is unrelated to unemployment in the long-run. 
C)  The inflation rate is related to unemployment in the short-run. 
D)  The inflation rate is unrelated to unemployment in the short-run.

Question 5

Discuss the advantages and disadvantages of drawing the AD-AS model in terms of inflation (ð)and rate of growth (g).

Accepted Answer

The AD-AS model in terms of ð and g is m

Question 6

In the long run,people come to expect whatever inflation rate the Bank of Canada chooses to produce,so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 7

Some countries have inflation in excess of 20 percent.Suppose that the sacrifice ratio is 2.5.What is the cost of reducing inflation from 20 percent to 6 percent?

Accepted Answer

The sacrifice ratio gives the annual per

Question 8

Which Canadian economist confirmed the theory of an inflation-unemployment tradeoff?

Accepted Answer

A)  R.Lipsey 
B)  A.W.Phillips 
C)  P.Samuelson 
D)  J.Keynes 
A)  R.Lipsey 
B)  A.W.Phillips 
C)  P.Samuelson 
D)  J.Keynes

Question 9

In the long run,what will shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in the money supply 
C)  a decrease in government spending 
D)  tax cuts 
A)  an increase in the minimum wage 
B)  an increase in the money supply 
C)  a decrease in government spending 
D)  tax cuts

Question 10

How does the short-run Phillips curve model reflect an increase in the natural rate of unemployment?

Accepted Answer

A)  as a leftward shift in the short-run Phillips curve 
B)  as a rightward shift in the short-run Phillips curve 
C)  as a downward movement along the short-run Phillips curve 
D)  as an upward movement along the short-run Phillips curve 
A)  as a leftward shift in the short-run Phillips curve 
B)  as a rightward shift in the short-run Phillips curve 
C)  as a downward movement along the short-run Phillips curve 
D)  as an upward movement along the short-run Phillips curve

Question 11

If the Bank of Canada announced a policy to reduce inflation and people found it credible,what would happen to the short-run Phillips curve and the sacrifice ratio?

Accepted Answer

A)  The short-run Phillips curve would shift right,and the sacrifice ratio would fall. 
B)  The short-run Phillips curve would shift right,and the sacrifice ratio would rise. 
C)  The short-run Phillips curve would shift left,and the sacrifice ratio would fall. 
D)  The short-run Phillips curve would shift left,and the sacrifice ratio would rise. 
A)  The short-run Phillips curve would shift right,and the sacrifice ratio would fall. 
B)  The short-run Phillips curve would shift right,and the sacrifice ratio would rise. 
C)  The short-run Phillips curve would shift left,and the sacrifice ratio would fall. 
D)  The short-run Phillips curve would shift left,and the sacrifice ratio would rise.

Question 12

According to Friedman and Phelps,when is the unemployment rate above the natural rate?

Accepted Answer

A)  when actual inflation is greater than expected inflation 
B)  when actual inflation is less than expected inflation 
C)  when actual inflation equals expected inflation 
D)  when actual inflation is high 
A)  when actual inflation is greater than expected inflation 
B)  when actual inflation is less than expected inflation 
C)  when actual inflation equals expected inflation 
D)  when actual inflation is high

Question 13

Figure 16-3  
-Refer to the Figure 16-3.When would the economy move from c and 3 to b and 2?

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly 
B)  in the short run if money supply growth decreased unexpectedly 
C)  in the long run if money supply growth increased 
D)  in the long run if money supply growth decreased 
A)  in the short run if money supply growth increased unexpectedly 
B)  in the short run if money supply growth decreased unexpectedly 
C)  in the long run if money supply growth increased 
D)  in the long run if money supply growth decreased

Question 14

If there is an adverse supply shock,what will most likely happen?

Accepted Answer

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

Question 15

Figure 16-2  
-Refer to the Figure 16-2.What is Curve 1?

Accepted Answer

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

Question 16

How were inflation and unemployment from 1980 to 1989 in Canada?

Accepted Answer

A)  Inflation was relatively low,and there were no fluctuations in unemployment. 
B)  Inflation was relatively low,and unemployment was high. 
C)  Unemployment was relatively low,but there were large fluctuations in inflation. 
D)  There were relatively large fluctuations in both unemployment and inflation. 
A)  Inflation was relatively low,and there were no fluctuations in unemployment. 
B)  Inflation was relatively low,and unemployment was high. 
C)  Unemployment was relatively low,but there were large fluctuations in inflation. 
D)  There were relatively large fluctuations in both unemployment and inflation.

Question 17

How was the Phillips curve for most of the 1990s and why?

Accepted Answer

A)  It was fairly far to the right partly because of lower inflation expectations. 
B)  It was fairly far to the left partly because of lower inflation expectations. 
C)  It was fairly far to the right partly because of adverse supply shocks. 
D)  It was fairly far to the left partly because of adverse supply shocks. 
A)  It was fairly far to the right partly because of lower inflation expectations. 
B)  It was fairly far to the left partly because of lower inflation expectations. 
C)  It was fairly far to the right partly because of adverse supply shocks. 
D)  It was fairly far to the left partly because of adverse supply shocks.

Question 18

Figure 16-4  
-Refer to the Figure 16-4.If the economy is at point h and the Bank of Canada pursues a contractionary monetary policy,then the economy will move to which point in the short and long run?

Accepted Answer

A)  point d in the short run and point c in the long run 
B)  point b in the short run and point c in the long run 
C)  point c in the long-run and point a in the long run 
D)  point m in the short run and point c in the long run 
A)  point d in the short run and point c in the long run 
B)  point b in the short run and point c in the long run 
C)  point c in the long-run and point a in the long run 
D)  point m in the short run and point c in the long run

Question 19

Figure 16-4  
-Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short and long run?

Accepted Answer

A)  point a in the short run and point b in the long run 
B)  point b in the short run and point a in the long run 
C)  point b in the short run and point c in the long run 
D)  point m in the short run and point h in the long run 
A)  point a in the short run and point b in the long run 
B)  point b in the short run and point a in the long run 
C)  point b in the short run and point c in the long run 
D)  point m in the short run and point h in the long run

Question 20

According to Phillips,which set of two items have a negative relation?

Accepted Answer

A)  output and unemployment 
B)  output and employment 
C)  wage inflation and output 
D)  wage inflation and unemployment 
A)  output and unemployment 
B)  output and employment 
C)  wage inflation and output 
D)  wage inflation and unemployment

How does the short-run Phillips curve model reflect an increase in the expected inflation?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,where does an increase in aggregate demand move the economy to,in the short run and the long run?

A vertical long-run Phillips curve is consistent with which of the following?

What did Friedman and Phelps argue about the relationship between inflation and unemployment?

Discuss the advantages and disadvantages of drawing the AD-AS model in terms of inflation (ð)and rate of growth (g).

In the long run,people come to expect whatever inflation rate the Bank of Canada chooses to produce,so unemployment returns to its natural rate.

Some countries have inflation in excess of 20 percent.Suppose that the sacrifice ratio is 2.5.What is the cost of reducing inflation from 20 percent to 6 percent?

Which Canadian economist confirmed the theory of an inflation-unemployment tradeoff?

In the long run,what will shift the long-run Phillips curve to the right?

How does the short-run Phillips curve model reflect an increase in the natural rate of unemployment?

If the Bank of Canada announced a policy to reduce inflation and people found it credible,what would happen to the short-run Phillips curve and the sacrifice ratio?

According to Friedman and Phelps,when is the unemployment rate above the natural rate?

Figure 16-3 -Refer to the Figure 16-3.When would the economy move from c and 3 to b and 2?

If there is an adverse supply shock,what will most likely happen?

Figure 16-2 -Refer to the Figure 16-2.What is Curve 1?

How were inflation and unemployment from 1980 to 1989 in Canada?

How was the Phillips curve for most of the 1990s and why?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point h and the Bank of Canada pursues a contractionary monetary policy,then the economy will move to which point in the short and long run?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short and long run?

According to Phillips,which set of two items have a negative relation?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small 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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Exam 16: The Short-Run Tradeoff Between Inflation and Unemployment

How does the short-run Phillips curve model reflect an increase in the expected inflation?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,where does an increase in aggregate demand move the economy to,in the short run and the long run?

A vertical long-run Phillips curve is consistent with which of the following?

What did Friedman and Phelps argue about the relationship between inflation and unemployment?

Discuss the advantages and disadvantages of drawing the AD-AS model in terms of inflation (ð)and rate of growth (g).

In the long run,people come to expect whatever inflation rate the Bank of Canada chooses to produce,so unemployment returns to its natural rate.

Some countries have inflation in excess of 20 percent.Suppose that the sacrifice ratio is 2.5.What is the cost of reducing inflation from 20 percent to 6 percent?

Which Canadian economist confirmed the theory of an inflation-unemployment tradeoff?

In the long run,what will shift the long-run Phillips curve to the right?

How does the short-run Phillips curve model reflect an increase in the natural rate of unemployment?

If the Bank of Canada announced a policy to reduce inflation and people found it credible,what would happen to the short-run Phillips curve and the sacrifice ratio?

According to Friedman and Phelps,when is the unemployment rate above the natural rate?

Figure 16-3 -Refer to the Figure 16-3.When would the economy move from c and 3 to b and 2?

If there is an adverse supply shock,what will most likely happen?

Figure 16-2 -Refer to the Figure 16-2.What is Curve 1?

How were inflation and unemployment from 1980 to 1989 in Canada?

How was the Phillips curve for most of the 1990s and why?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point h and the Bank of Canada pursues a contractionary monetary policy,then the economy will move to which point in the short and long run?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short and long run?

According to Phillips,which set of two items have a negative relation?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small 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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