Question 1

Some economists believe that inflation could actually help reduce unemployment in the short-run.

Accepted Answer

A) True 
 B)False

Question 2

If the economy has substantial unemployment, then the inflationary costs of expansionary policy are likely to be:

Accepted Answer

A) ​low, and the unemployment gains minimal. 
B) ​low, and the unemployment gains large. 
C) ​high, and the unemployment gains minimal. 
D) ​high, and the unemployment gains large. 
A) ​low, and the unemployment gains minimal. 
B) ​low, and the unemployment gains large. 
C) ​high, and the unemployment gains minimal. 
D) ​high, and the unemployment gains large.

Question 3

When the economy is already at relatively high levels of employment, if policy makers try to further reduce the unemployment levels through expansionary policies, what will be the likely result?

Accepted Answer

Further stimulating fiscal or

Question 4

A common example of indexing in the United States is:

Accepted Answer

A) ​annual bonuses to workers. 
B) ​wage increases with seniority. 
C) ​30-year fixed-rate mortgage loans. 
D) ​escalator clauses tied to the CPI in wage agreements. 
A) ​annual bonuses to workers. 
B) ​wage increases with seniority. 
C) ​30-year fixed-rate mortgage loans. 
D) ​escalator clauses tied to the CPI in wage agreements.

Question 5

Critics of inflation targeting will argue that central banks need flexibility.

Accepted Answer

A) True 
 B)False

Question 6

Decreases in aggregate demand move the economy down the short run aggregate supply and up the Phillips Curve.

Accepted Answer

A) True 
 B)False

Question 7

A decrease in the expected level of inflation will cause short-run aggregate supply to ____ and the short-run Phillips curve to ____.

Accepted Answer

A) ​shift left; shift right 
B) ​shift left; shift left 
C) ​shift right; shift right 
D) ​shift right; shift left 
A) ​shift left; shift right 
B) ​shift left; shift left 
C) ​shift right; shift right 
D) ​shift right; shift left

Question 8

When expectations of inflation are revised upward, the short-run Phillips curve:

Accepted Answer

A) ​shifts rightward. 
B) ​becomes steeper. 
C) ​shifts leftward. 
D) ​becomes flatter. 
A) ​shifts rightward. 
B) ​becomes steeper. 
C) ​shifts leftward. 
D) ​becomes flatter.

Question 9

According to the Taylor rule, the Fed should:

Accepted Answer

A) ​lower the fed funds rate by 0.5% if RGDP increases 1.0% over potential GDP. 
B) ​raise the fed funds rate by 0.5% if RGDP increases 1.0% over potential GDP. 
C) ​raise the fed funds rate by 1.0% if RGDP increases 0.5% over potential GDP. 
D) ​raise the fed funds rate by 2.0% if RGDP increases 0.5% over potential GDP. 
A) ​lower the fed funds rate by 0.5% if RGDP increases 1.0% over potential GDP. 
B) ​raise the fed funds rate by 0.5% if RGDP increases 1.0% over potential GDP. 
C) ​raise the fed funds rate by 1.0% if RGDP increases 0.5% over potential GDP. 
D) ​raise the fed funds rate by 2.0% if RGDP increases 0.5% over potential GDP.

Question 10

According to the analysis of the short run and long run Phillips curves in the text, a persistent inflation rate of 10% per year:

Accepted Answer

A) ​Would keep unemployment below the natural rate. 
B) ​Would keep unemployment above the natural rate. 
C) ​Would result in unemployment at the natural rate of unemployment. 
D) ​Is consistent with any of the above scenarios. 
A) ​Would keep unemployment below the natural rate. 
B) ​Would keep unemployment above the natural rate. 
C) ​Would result in unemployment at the natural rate of unemployment. 
D) ​Is consistent with any of the above scenarios.

Question 11

The natural rate hypothesis states that the economy will self-correct back to the natural rate of unemployment, so that a move along a short run Phillips curve will not be permanent.

Accepted Answer

A) True 
 B)False

Question 12

If expectations are rational, how can government influence unemployment in a predictable way?

Accepted Answer

A) ​with the normal tools, used in the normal fashion 
B) ​with fiscal policy; monetary policy will not work 
C) ​with monetary policy; fiscal policy will not work 
D) ​with surprise changes in policy only 
A) ​with the normal tools, used in the normal fashion 
B) ​with fiscal policy; monetary policy will not work 
C) ​with monetary policy; fiscal policy will not work 
D) ​with surprise changes in policy only

Question 13

How do you think each of the following would affect the unemployment rate?
a.The Fed increases the money supply and engineers an unexpected increase in the rate of inflation from 2 percent to 5 percent.
b.The rate of inflation remains stable at 2 percent over a five-year period, as expected.
c.There is an unexpected decrease in the rate of inflation from 10 percent to 3 percent.

Accepted Answer

​
a.
An unanticipated increase in the ra

Question 14

If expectations are rational, can monetary and fiscal policy makers accurately control the effects their policies have on unemployment?

Accepted Answer

A) ​Yes, provided they announce policies in advance. 
B) ​Yes, both policies are effective in altering unemployment in the desired ways. 
C) ​No, because these effects depend on whether and to what extent people are fooled by those policies. 
D) ​No, only fiscal policy can alter unemployment. 
A) ​Yes, provided they announce policies in advance. 
B) ​Yes, both policies are effective in altering unemployment in the desired ways. 
C) ​No, because these effects depend on whether and to what extent people are fooled by those policies. 
D) ​No, only fiscal policy can alter unemployment.

Question 15

If the level of unemployment is below the natural rate of unemployment, it would be expected that:

Accepted Answer

A) ​the short-run Phillips curve will shift leftward, as inflationary expectations adjust. 
B) ​the inflation rate will increase. 
C) ​the inflation rate will decrease. 
D) ​the long-run Phillips curve will shift rightward, as inflationary expectations adjust. 
A) ​the short-run Phillips curve will shift leftward, as inflationary expectations adjust. 
B) ​the inflation rate will increase. 
C) ​the inflation rate will decrease. 
D) ​the long-run Phillips curve will shift rightward, as inflationary expectations adjust.

Question 16

Which of the following is true?

Accepted Answer

A) ​Inflation and unemployment rates can both decrease in the short run in response to negative supply shocks. 
B) ​Inflation and unemployment rates cannot both increase or both decrease in the short run in response to changes in aggregate demand. 
C) ​Inflation and unemployment rates can both increase in the short run in response to positive supply shocks. 
D) ​All of the above are true. 
A) ​Inflation and unemployment rates can both decrease in the short run in response to negative supply shocks. 
B) ​Inflation and unemployment rates cannot both increase or both decrease in the short run in response to changes in aggregate demand. 
C) ​Inflation and unemployment rates can both increase in the short run in response to positive supply shocks. 
D) ​All of the above are true.

Question 17

If a fixed money growth rate of 4 percent per year is followed and the growth rate of the natural level of real GDP is 4 percent per year, the average rate of inflation is:

Accepted Answer

A) ​8 percent. 
B) ​4 percent. 
C) ​zero. 
D) ​1-2 percent. 
A) ​8 percent. 
B) ​4 percent. 
C) ​zero. 
D) ​1-2 percent.

Question 18

If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated decrease in aggregate demand will result in:

Accepted Answer

A) ​a decrease in both aggregate demand and short-run aggregate supply. 
B) ​an increase in short-run aggregate supply that will maintain full employment. 
C) ​higher prices that will reduce aggregate demand to its original level. 
D) ​a decrease in short-run aggregate supply that will maintain full employment. 
A) ​a decrease in both aggregate demand and short-run aggregate supply. 
B) ​an increase in short-run aggregate supply that will maintain full employment. 
C) ​higher prices that will reduce aggregate demand to its original level. 
D) ​a decrease in short-run aggregate supply that will maintain full employment.

Question 19

What is the short-run Phillips curve and what observations does it make?

Accepted Answer

The Phillips curve was observed as an in

Question 20

The cost of maintaining unemployment below its natural rate with expansionary government policy is:

Accepted Answer

A) ​increasing inflation. 
B) ​decreasing inflation. 
C) ​always a larger federal deficit. 
D) ​always a smaller federal deficit. 
A) ​increasing inflation. 
B) ​decreasing inflation. 
C) ​always a larger federal deficit. 
D) ​always a smaller federal deficit.

Some economists believe that inflation could actually help reduce unemployment in the short-run.

If the economy has substantial unemployment, then the inflationary costs of expansionary policy are likely to be:

When the economy is already at relatively high levels of employment, if policy makers try to further reduce the unemployment levels through expansionary policies, what will be the likely result?

A common example of indexing in the United States is:

Critics of inflation targeting will argue that central banks need flexibility.

Decreases in aggregate demand move the economy down the short run aggregate supply and up the Phillips Curve.

A decrease in the expected level of inflation will cause short-run aggregate supply to and the short-run Phillips curve to .

When expectations of inflation are revised upward, the short-run Phillips curve:

According to the Taylor rule, the Fed should:

According to the analysis of the short run and long run Phillips curves in the text, a persistent inflation rate of 10% per year:

The natural rate hypothesis states that the economy will self-correct back to the natural rate of unemployment, so that a move along a short run Phillips curve will not be permanent.

If expectations are rational, how can government influence unemployment in a predictable way?

If expectations are rational, can monetary and fiscal policy makers accurately control the effects their policies have on unemployment?

If the level of unemployment is below the natural rate of unemployment, it would be expected that:

Which of the following is true?

If a fixed money growth rate of 4 percent per year is followed and the growth rate of the natural level of real GDP is 4 percent per year, the average rate of inflation is:

If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated decrease in aggregate demand will result in:

What is the short-run Phillips curve and what observations does it make?

The cost of maintaining unemployment below its natural rate with expansionary government policy is:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exam 19: Measuring Economic Performance

Some economists believe that inflation could actually help reduce unemployment in the short-run.

If the economy has substantial unemployment, then the inflationary costs of expansionary policy are likely to be:

When the economy is already at relatively high levels of employment, if policy makers try to further reduce the unemployment levels through expansionary policies, what will be the likely result?

A common example of indexing in the United States is:

Critics of inflation targeting will argue that central banks need flexibility.

Decreases in aggregate demand move the economy down the short run aggregate supply and up the Phillips Curve.

A decrease in the expected level of inflation will cause short-run aggregate supply to ____ and the short-run Phillips curve to ____.

When expectations of inflation are revised upward, the short-run Phillips curve:

According to the Taylor rule, the Fed should:

According to the analysis of the short run and long run Phillips curves in the text, a persistent inflation rate of 10% per year:

The natural rate hypothesis states that the economy will self-correct back to the natural rate of unemployment, so that a move along a short run Phillips curve will not be permanent.

If expectations are rational, how can government influence unemployment in a predictable way?

If expectations are rational, can monetary and fiscal policy makers accurately control the effects their policies have on unemployment?

If the level of unemployment is below the natural rate of unemployment, it would be expected that:

Which of the following is true?

If a fixed money growth rate of 4 percent per year is followed and the growth rate of the natural level of real GDP is 4 percent per year, the average rate of inflation is:

If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated decrease in aggregate demand will result in:

What is the short-run Phillips curve and what observations does it make?

The cost of maintaining unemployment below its natural rate with expansionary government policy is:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

A decrease in the expected level of inflation will cause short-run aggregate supply to and the short-run Phillips curve to .