Question 1

As people try to avoid the inflation tax, the government must _____ the inflation rate to _____.

Accepted Answer

A) lower; avoid a budget deficit 
B) lower; raise the same revenue from inflation 
C) increase; raise the same revenue from inflation 
D) increase; avoid a budget surplus, which will harm employment 
A) lower; avoid a budget deficit 
B) lower; raise the same revenue from inflation 
C) increase; raise the same revenue from inflation 
D) increase; avoid a budget surplus, which will harm employment

Question 2

Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.

Accepted Answer

A) True 
 B)False

Question 3

During periods of high inflation, the short-run aggregate supply curve is:

Accepted Answer

A) vertical. 
B) horizontal. 
C) upward sloping. 
D) downward sloping. 
A) vertical. 
B) horizontal. 
C) upward sloping. 
D) downward sloping.

Question 4

Real seignorage is calculated by the:

Accepted Answer

A) real interest rate times the money supply. 
B) rate of growth of the money supply times the real money supply. 
C) real interest rate minus the inflation rate. 
D) rate of growth of the money supply divided by the price index. 
A) real interest rate times the money supply. 
B) rate of growth of the money supply times the real money supply. 
C) real interest rate minus the inflation rate. 
D) rate of growth of the money supply divided by the price index.

Question 5

Use the following to answer questions :
Figure: Expected Inflation and the Short-Run Phillips Curve
SRPCS1U1B10S1U1B0 is the Phillips curve with an expected inflation rate of zero; SRPCS1U1B12S1U1B0 is the Phillips curve with an expected inflation rate of 2%.  
-(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, no inflation, and no expectation of inflation. If the central bank increases the money supply such that aggregate demand shifts to the right and unemployment falls to 4%, then inflation will:

Accepted Answer

A) fall to -2%. 
B) not change. 
C) rise to 2%. 
D) rise to 4%. 
A) fall to -2%. 
B) not change. 
C) rise to 2%. 
D) rise to 4%.

Question 6

Explain the political asymmetry associated with policies that can cause or cure inflation.

Accepted Answer

Policies that bring down inflation-incre

Question 7

Deflation:

Accepted Answer

A) can cause increases in output. 
B) can cause budget surpluses. 
C) can cause decreases in output. 
D) will not affect output. 
A) can cause increases in output. 
B) can cause budget surpluses. 
C) can cause decreases in output. 
D) will not affect output.

Question 8

The central bank of a government can print more money to pay for government deficits. Why do some refer to this practice as imposing an inflation tax?

Accepted Answer

Printing new money to pay for budget def

Question 9

As a result of a downturn in the economy, a firm cuts back on workers' hours but does not fire workers. Following Okun's law, this is one reason:

Accepted Answer

A) the relationship between the output gap and the unemployment rate is positive. 
B) the relationship between the output gap and the unemployment is negative and less than a one-to-one relationship. 
C) a negative output gap is associated with an unusually low unemployment rate. 
D) a positive output gap is associated with an unusually high unemployment rate. 
A) the relationship between the output gap and the unemployment rate is positive. 
B) the relationship between the output gap and the unemployment is negative and less than a one-to-one relationship. 
C) a negative output gap is associated with an unusually low unemployment rate. 
D) a positive output gap is associated with an unusually high unemployment rate.

Question 10

Use the following to answer question :
Figure: The Great Disinflation  
-(Figure: The Great Disinflation) Look at the figure The Great Disinflation. In the early 1980s, the inflation rate was beaten down by the Federal Reserve's tight monetary policy. In the short run this policy led to a _____ level of actual output and a _____ rate of unemployment.

Accepted Answer

A) high; high 
B) low; high 
C) low; low 
D) high; low 
A) high; high 
B) low; high 
C) low; low 
D) high; low

Question 11

If an economy has just had a serious recession but real GDP is expanding once again, we can expect the unemployment rate to:

Accepted Answer

A) fall immediately. 
B) rise immediately. 
C) rise if people who were previously discouraged enter the work force but do not find jobs right away. 
D) fall if people who were previously discouraged enter the work force but do not find jobs right away. 
A) fall immediately. 
B) rise immediately. 
C) rise if people who were previously discouraged enter the work force but do not find jobs right away. 
D) fall if people who were previously discouraged enter the work force but do not find jobs right away.

Question 12

In June 2008 _____ had the world's highest inflation rate, _____ Germany's rate in 1922-1923.

Accepted Answer

A) Zimbabwe; equal to 
B) Zimbabwe; even higher than 
C) the Republic of Congo; equal to 
D) the Republic of Congo; less than 
A) Zimbabwe; equal to 
B) Zimbabwe; even higher than 
C) the Republic of Congo; equal to 
D) the Republic of Congo; less than

Question 13

Liquidity traps are most likely to occur when the:

Accepted Answer

A) economy is going through a recovery. 
B) economy is expanding rapidly. 
C) public expects inflation. 
D) public expects deflation. 
A) economy is going through a recovery. 
B) economy is expanding rapidly. 
C) public expects inflation. 
D) public expects deflation.

Question 14

Suppose that the natural rate of unemployment is 5% and that the economy is operating at 101% of potential output. Use Okun's law to determine the unemployment rate.

Accepted Answer

Okun's law says that if the output gap r

Question 15

Use the following to answer questions :
Figure: Actual and Natural Rates of Unemployment  
-(Figure: Actual and Natural Rates of Unemployment) Look at the figure Actual and Natural Rates of Unemployment. In 1982, the cyclical unemployment rate was approximately:

Accepted Answer

A) zero. 
B) 4%. 
C) 6%. 
D) 10%. 
A) zero. 
B) 4%. 
C) 6%. 
D) 10%.

Question 16

An increase in the expected rate of inflation:

Accepted Answer

A) shifts the short-run Phillips curve down. 
B) shifts the short-run Phillips curve up. 
C) moves the economy along the short-run Phillips curve to higher rates of inflation. 
D) moves the economy along the short-run Phillips curve to higher rates on unemployment. 
A) shifts the short-run Phillips curve down. 
B) shifts the short-run Phillips curve up. 
C) moves the economy along the short-run Phillips curve to higher rates of inflation. 
D) moves the economy along the short-run Phillips curve to higher rates on unemployment.

Question 17

Inflation does NOT reduce purchasing power if:

Accepted Answer

A) prices of essential products, such as food and gasoline, don't increase too much. 
B) nominal wages rise at the same rate as prices. 
C) it remains under 10% per year. 
D) the Federal Reserve increases the money supply enough to offset it. 
A) prices of essential products, such as food and gasoline, don't increase too much. 
B) nominal wages rise at the same rate as prices. 
C) it remains under 10% per year. 
D) the Federal Reserve increases the money supply enough to offset it.

Question 18

According to recent estimates of Okun's law, if the unemployment rate FELL by a full percentage point, it would most probably be attributable to a _____ in real GDP.

Accepted Answer

A) 3% increase 
B) 2% increase 
C) 1% increase 
D) 3% decrease 
A) 3% increase 
B) 2% increase 
C) 1% increase 
D) 3% decrease

Question 19

Historically, governments have turned to seignorage to pay their bills when:

Accepted Answer

A) the economy is growing. 
B) the government lacks the will to reduce the budget deficit by raising taxes or reducing spending. 
C) the inflation rate is low. 
D) the unemployment rate is low. 
A) the economy is growing. 
B) the government lacks the will to reduce the budget deficit by raising taxes or reducing spending. 
C) the inflation rate is low. 
D) the unemployment rate is low.

Question 20

What distinction did Zimbabwe achieve in June 2008?

Accepted Answer

A) It was the first African nation to become a democracy. 
B) It ended apartheid. 
C) It had the world's highest inflation rate. 
D) It had the world's highest unemployment rate. 
A) It was the first African nation to become a democracy. 
B) It ended apartheid. 
C) It had the world's highest inflation rate. 
D) It had the world's highest unemployment rate.

As people try to avoid the inflation tax, the government must _ the inflation rate to _.

Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.

During periods of high inflation, the short-run aggregate supply curve is:

Real seignorage is calculated by the:

Explain the political asymmetry associated with policies that can cause or cure inflation.

Deflation:

The central bank of a government can print more money to pay for government deficits. Why do some refer to this practice as imposing an inflation tax?

As a result of a downturn in the economy, a firm cuts back on workers' hours but does not fire workers. Following Okun's law, this is one reason:

If an economy has just had a serious recession but real GDP is expanding once again, we can expect the unemployment rate to:

In June 2008 _ had the world's highest inflation rate, _ Germany's rate in 1922-1923.

Liquidity traps are most likely to occur when the:

Suppose that the natural rate of unemployment is 5% and that the economy is operating at 101% of potential output. Use Okun's law to determine the unemployment rate.

Use the following to answer questions : Figure: Actual and Natural Rates of Unemployment -(Figure: Actual and Natural Rates of Unemployment) Look at the figure Actual and Natural Rates of Unemployment. In 1982, the cyclical unemployment rate was approximately:

An increase in the expected rate of inflation:

Inflation does NOT reduce purchasing power if:

According to recent estimates of Okun's law, if the unemployment rate FELL by a full percentage point, it would most probably be attributable to a _____ in real GDP.

Historically, governments have turned to seignorage to pay their bills when:

What distinction did Zimbabwe achieve in June 2008?

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

As people try to avoid the inflation tax, the government must _____ the inflation rate to _____.

Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.

During periods of high inflation, the short-run aggregate supply curve is:

Real seignorage is calculated by the:

Explain the political asymmetry associated with policies that can cause or cure inflation.

Deflation:

The central bank of a government can print more money to pay for government deficits. Why do some refer to this practice as imposing an inflation tax?

As a result of a downturn in the economy, a firm cuts back on workers' hours but does not fire workers. Following Okun's law, this is one reason:

If an economy has just had a serious recession but real GDP is expanding once again, we can expect the unemployment rate to:

In June 2008 _____ had the world's highest inflation rate, _____ Germany's rate in 1922-1923.

Liquidity traps are most likely to occur when the:

Suppose that the natural rate of unemployment is 5% and that the economy is operating at 101% of potential output. Use Okun's law to determine the unemployment rate.

Use the following to answer questions : Figure: Actual and Natural Rates of Unemployment -(Figure: Actual and Natural Rates of Unemployment) Look at the figure Actual and Natural Rates of Unemployment. In 1982, the cyclical unemployment rate was approximately:

An increase in the expected rate of inflation:

Inflation does NOT reduce purchasing power if:

According to recent estimates of Okun's law, if the unemployment rate FELL by a full percentage point, it would most probably be attributable to a _____ in real GDP.

Historically, governments have turned to seignorage to pay their bills when:

What distinction did Zimbabwe achieve in June 2008?

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

As people try to avoid the inflation tax, the government must _ the inflation rate to _.

In June 2008 _ had the world's highest inflation rate, _ Germany's rate in 1922-1923.