Question 1

When the output gap is negative, the actual unemployment rate is:

Accepted Answer

A) above the natural rate. 
B) below the natural rate. 
C) equal to the natural rate. 
D) The actual and natural unemployment rates are not related to the output gap. 
A) above the natural rate. 
B) below the natural rate. 
C) equal to the natural rate. 
D) The actual and natural unemployment rates are not related to the output gap.

Question 2

Expecting the inflation rate to be 3%, Adrianna decides to put her savings in bonds yielding a fixed 5% interest rate over a year. If the actual inflation rate is _____, it can be argued that _____ is (are) better off.

Accepted Answer

A) below 3%; Adrianna 
B) exactly 5%; both the bond issuer and Adrianna 
C) above 3%; Adrianna 
D) below 3%; the bond issuer 
A) below 3%; Adrianna 
B) exactly 5%; both the bond issuer and Adrianna 
C) above 3%; Adrianna 
D) below 3%; the bond issuer

Question 3

Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.

Accepted Answer

A) permanent increase 
B) permanent decrease 
C) temporary increase 
D) temporary decrease 
A) permanent increase 
B) permanent decrease 
C) temporary increase 
D) temporary decrease

Question 4

If there has been a downward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

Accepted Answer

A) AD; left 
B) AD; right 
C) SRAS; left 
D) SRAS; right 
A) AD; left 
B) AD; right 
C) SRAS; left 
D) SRAS; right

Question 5

Seignorage refers to the:

Accepted Answer

A) problems faced by Social Security as the population ages. 
B) government's right to print money. 
C) problems senior citizens face in retirement. 
D) problems created when the government prints too much money. 
A) problems faced by Social Security as the population ages. 
B) government's right to print money. 
C) problems senior citizens face in retirement. 
D) problems created when the government prints too much money.

Question 6

Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is _____, it can be argued that _____ is (are) worse off.

Accepted Answer

A) above 3%; the bank issuing the certificate 
B) exactly 6%; both the bank and Tony 
C) below 3%; Tony 
D) below 3%; the bank issuing the certificate 
A) above 3%; the bank issuing the certificate 
B) exactly 6%; both the bank and Tony 
C) below 3%; Tony 
D) below 3%; the bank issuing the certificate

Question 7

Use the following to answer questions :
Figure: Short-Run Phillips Curve  
-(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. The NAIRU is:

Accepted Answer

A) 3%. 
B) 5%. 
C) 7%. 
D) 8%. 
A) 3%. 
B) 5%. 
C) 7%. 
D) 8%.

Question 8

Use the following to answer questions :
Figure: AD-AS  
-(Figure: AD-AS) Look at the figure AD-AS. Suppose the economy is initially at E1, where AD1 intersects SRAS1 and LRAS. Now, suppose that the AD1 shifts to AD2. That shift could be due to:

Accepted Answer

A) an increase in the aggregate price level. 
B) a decrease in government expenditure. 
C) an increase in tax rates. 
D) an increase in money supply. 
A) an increase in the aggregate price level. 
B) a decrease in government expenditure. 
C) an increase in tax rates. 
D) an increase in money supply.

Question 9

There is a zero bound to:

Accepted Answer

A) the real money supply. 
B) nominal interest rates. 
C) potential output. 
D) real money demand. 
A) the real money supply. 
B) nominal interest rates. 
C) potential output. 
D) real money demand.

Question 10

Each point on a Phillips curve is a different combination of:

Accepted Answer

A) price and quantity. 
B) inflation and unemployment. 
C) the interest rate and investment. 
D) saving and disposable income. 
A) price and quantity. 
B) inflation and unemployment. 
C) the interest rate and investment. 
D) saving and disposable income.

Question 11

If the money supply grows by 4% and the real money supply is $100 billion, real seignorage is:

Accepted Answer

A) $4 billion. 
B) $25 billion. 
C) $400 billion. 
D) $2.5 trillion. 
A) $4 billion. 
B) $25 billion. 
C) $400 billion. 
D) $2.5 trillion.

Question 12

The U.S. government reports a core inflation rate that EXCLUDES _____ and _____ prices to remove the volatility of those two sectors from inflation estimates.

Accepted Answer

A) housing; automobile 
B) steel; housing 
C) energy; food 
D) gasoline; housing 
A) housing; automobile 
B) steel; housing 
C) energy; food 
D) gasoline; housing

Question 13

Use the following to answer questions :
Figure: Short-Run Phillips Curve  
-(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC2 is based on an expected inflation rate of:

Accepted Answer

A) zero. 
B) 1%. 
C) 2%. 
D) 5%. 
A) zero. 
B) 1%. 
C) 2%. 
D) 5%.

Question 14

The short-run Phillips curve:

Accepted Answer

A) depicts the positive relationship between the unemployment rate and the inflation rate. 
B) broke down in the 1970s because of a supply shock. 
C) illustrates that expected inflation has little effect on the natural rate of unemployment. 
D) shows that policies may not be able to change the natural rate of unemployment. 
A) depicts the positive relationship between the unemployment rate and the inflation rate. 
B) broke down in the 1970s because of a supply shock. 
C) illustrates that expected inflation has little effect on the natural rate of unemployment. 
D) shows that policies may not be able to change the natural rate of unemployment.

Question 15

According to the short-run Phillips curve, when actual real GDP is _____ potential output, the price level _____ and the unemployment rate falls.

Accepted Answer

A) below; increases 
B) above; decreases 
C) below; decreases 
D) above; increases 
A) below; increases 
B) above; decreases 
C) below; decreases 
D) above; increases

Question 16

Seignorage is:

Accepted Answer

A) the government's cost of printing and coining money. 
B) the revenue generated by the government's right to print money. 
C) the money financial institutions make selling government bonds to the Fed when the Fed creates money. 
D) the revenue the government generates in tax receipts. 
A) the government's cost of printing and coining money. 
B) the revenue generated by the government's right to print money. 
C) the money financial institutions make selling government bonds to the Fed when the Fed creates money. 
D) the revenue the government generates in tax receipts.

Question 17

To avoid accelerating inflation over time, a government's policy should _____ to trade off lower unemployment for higher inflation rather than _____.

Accepted Answer

A) try; accept a lower unemployment rate so that the actual inflation rate is less than the expected inflation rate 
B) not try; accept a high enough unemployment rate so that the actual inflation rate matches the expected inflation rate 
C) try; accept a higher unemployment rate so that the actual inflation rate is higher than the expected inflation rate 
D) not try; try to control inflation only by using aggressive disinflationary polices 
A) try; accept a lower unemployment rate so that the actual inflation rate is less than the expected inflation rate 
B) not try; accept a high enough unemployment rate so that the actual inflation rate matches the expected inflation rate 
C) try; accept a higher unemployment rate so that the actual inflation rate is higher than the expected inflation rate 
D) not try; try to control inflation only by using aggressive disinflationary polices

Question 18

An inflation tax is the effect on the public of a reduction in the value of money caused by inflation.

Accepted Answer

A) True 
 B)False

Question 19

If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _____ and real GDP _____.

Accepted Answer

A) 10%; increases by 10% 
B) 5%; increases by 5%, according to Okun's law 
C) 10%; returns to the potential level of output 
D) 5%; increases by 20%, given a marginal propensity to consume of 0.5 
A) 10%; increases by 10% 
B) 5%; increases by 5%, according to Okun's law 
C) 10%; returns to the potential level of output 
D) 5%; increases by 20%, given a marginal propensity to consume of 0.5

Question 20

Workers in country A have wage contracts for cost-of-living adjustments (COLAs), which adjust wages to offset the effect of inflation, and workers in country B do NOT. When the central banks of countries A and B increase the money supply:

Accepted Answer

A) prices in country A increase faster than prices in country B. 
B) prices in country B increase faster than prices in country A. 
C) prices in countries A and B will change at the same rate. 
D) COLAs have no effect on the speed of price changes. 
A) prices in country A increase faster than prices in country B. 
B) prices in country B increase faster than prices in country A. 
C) prices in countries A and B will change at the same rate. 
D) COLAs have no effect on the speed of price changes.

When the output gap is negative, the actual unemployment rate is:

Expecting the inflation rate to be 3%, Adrianna decides to put her savings in bonds yielding a fixed 5% interest rate over a year. If the actual inflation rate is _, it can be argued that _ is (are) better off.

Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.

If there has been a downward movement along the fixed short-run Phillips curve, the _ curve has shifted to the _.

Seignorage refers to the:

Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is _, it can be argued that _ is (are) worse off.

Use the following to answer questions : Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. The NAIRU is:

Use the following to answer questions : Figure: AD-AS -(Figure: AD-AS) Look at the figure AD-AS. Suppose the economy is initially at E₁, where AD₁intersects SRAS₁ and LRAS. Now, suppose that the AD₁shifts to AD_2.That shift could be due to:

There is a zero bound to:

Each point on a Phillips curve is a different combination of:

If the money supply grows by 4% and the real money supply is $100 billion, real seignorage is:

The U.S. government reports a core inflation rate that EXCLUDES _ and _ prices to remove the volatility of those two sectors from inflation estimates.

Use the following to answer questions : Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC₂ is based on an expected inflation rate of:

The short-run Phillips curve:

According to the short-run Phillips curve, when actual real GDP is _ potential output, the price level _ and the unemployment rate falls.

Seignorage is:

To avoid accelerating inflation over time, a government's policy should _ to trade off lower unemployment for higher inflation rather than _.

An inflation tax is the effect on the public of a reduction in the value of money caused by inflation.

If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _ and real GDP _.

Workers in country A have wage contracts for cost-of-living adjustments (COLAs), which adjust wages to offset the effect of inflation, and workers in country B do NOT. When the central banks of countries A and B increase the money supply:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 16: Inflation, Disinflation, and Deflation

When the output gap is negative, the actual unemployment rate is:

Expecting the inflation rate to be 3%, Adrianna decides to put her savings in bonds yielding a fixed 5% interest rate over a year. If the actual inflation rate is _____, it can be argued that _____ is (are) better off.

Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.

If there has been a downward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

Seignorage refers to the:

Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is _____, it can be argued that _____ is (are) worse off.

Use the following to answer questions : Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. The NAIRU is:

Use the following to answer questions : Figure: AD-AS -(Figure: AD-AS) Look at the figure AD-AS. Suppose the economy is initially at E1, where AD1 intersects SRAS1 and LRAS. Now, suppose that the AD1 shifts to AD2. That shift could be due to:

There is a zero bound to:

Each point on a Phillips curve is a different combination of:

If the money supply grows by 4% and the real money supply is $100 billion, real seignorage is:

The U.S. government reports a core inflation rate that EXCLUDES _____ and _____ prices to remove the volatility of those two sectors from inflation estimates.

Use the following to answer questions : Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC2 is based on an expected inflation rate of:

The short-run Phillips curve:

According to the short-run Phillips curve, when actual real GDP is _____ potential output, the price level _____ and the unemployment rate falls.

Seignorage is:

To avoid accelerating inflation over time, a government's policy should _____ to trade off lower unemployment for higher inflation rather than _____.

An inflation tax is the effect on the public of a reduction in the value of money caused by inflation.

If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _____ and real GDP _____.

Workers in country A have wage contracts for cost-of-living adjustments (COLAs), which adjust wages to offset the effect of inflation, and workers in country B do NOT. When the central banks of countries A and B increase the money supply:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Expecting the inflation rate to be 3%, Adrianna decides to put her savings in bonds yielding a fixed 5% interest rate over a year. If the actual inflation rate is _, it can be argued that _ is (are) better off.

If there has been a downward movement along the fixed short-run Phillips curve, the _ curve has shifted to the _.

Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is _, it can be argued that _ is (are) worse off.

Use the following to answer questions : Figure: AD-AS -(Figure: AD-AS) Look at the figure AD-AS. Suppose the economy is initially at E₁, where AD₁intersects SRAS₁ and LRAS. Now, suppose that the AD₁shifts to AD_2.That shift could be due to:

The U.S. government reports a core inflation rate that EXCLUDES _ and _ prices to remove the volatility of those two sectors from inflation estimates.

Use the following to answer questions : Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC₂ is based on an expected inflation rate of:

According to the short-run Phillips curve, when actual real GDP is _ potential output, the price level _ and the unemployment rate falls.

To avoid accelerating inflation over time, a government's policy should _ to trade off lower unemployment for higher inflation rather than _.

If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _ and real GDP _.