Question 1

Which of the following is true?​

Accepted Answer

A) ​Inflation and unemployment rates can both increase in the short run in response to positive supply shocks. 
B) ​Inflation and unemployment rates can both decrease in the short run in response to reduced aggregate demand. 
C) ​Inflation and unemployment rates can both decrease in the short run in response to negative supply shocks. 
D) None of the above. 
A) ​Inflation and unemployment rates can both increase in the short run in response to positive supply shocks. 
B) ​Inflation and unemployment rates can both decrease in the short run in response to reduced aggregate demand. 
C) ​Inflation and unemployment rates can both decrease in the short run in response to negative supply shocks. 
D) None of the above.

Question 2

If inflation rises or falls faster than people forecast in the short run but not in the long run, what are the shapes of the Phillips curves?

Accepted Answer

A) ​The Phillips curve is vertical in the short run, and upward sloping in the long run. 
B) ​The Phillips curve is downward sloping in the short run, and vertical in the long run. 
C) ​The Phillips curve is upward sloping in the short run, and horizontal in the long run. 
D) ​The Phillips curve is vertical in the short run and long run. 
A) ​The Phillips curve is vertical in the short run, and upward sloping in the long run. 
B) ​The Phillips curve is downward sloping in the short run, and vertical in the long run. 
C) ​The Phillips curve is upward sloping in the short run, and horizontal in the long run. 
D) ​The Phillips curve is vertical in the short run and long run.

Question 3

What do rational expectations theorists believe? What is their critics' point of view?

Accepted Answer

Rational expectation economists believe

Question 4

With rational expectations, a policy that would increase AD would lead to:

Accepted Answer

A) ​higher inflation and higher real output in the short run. 
B) ​higher inflation and lower real output in the short run. 
C) ​higher inflation and an indeterminate effect on real output in the short run, if people's expectations were correct. 
D) ​higher inflation and no change in real output, if people's expectations were correct in the short-run. 
A) ​higher inflation and higher real output in the short run. 
B) ​higher inflation and lower real output in the short run. 
C) ​higher inflation and an indeterminate effect on real output in the short run, if people's expectations were correct. 
D) ​higher inflation and no change in real output, if people's expectations were correct in the short-run.

Question 5

If the public has rational expectations, an attempt to increase aggregate demand to stimulate the economy will:

Accepted Answer

A) ​be less inflationary in the short run than if the public alters their expectations slowly in response to changes in government policy. 
B) ​be more effective if the public alters their expectations quickly in response to changes in government policy. 
C) ​be ineffective if the shift in aggregate demand is predictable. 
D) ​all of the above. 
A) ​be less inflationary in the short run than if the public alters their expectations slowly in response to changes in government policy. 
B) ​be more effective if the public alters their expectations quickly in response to changes in government policy. 
C) ​be ineffective if the shift in aggregate demand is predictable. 
D) ​all of the above.

Question 6

When the short run aggregate supply curve shifts right, it ___ the short-run Phillips curve.​

Accepted Answer

A) ​Moves the economy up along 
B) ​Moves the economy down along 
C) ​Shifts right 
D) ​Shifts left 
A) ​Moves the economy up along 
B) ​Moves the economy down along 
C) ​Shifts right 
D) ​Shifts left

Question 7

A main argument against indexing is that:

Accepted Answer

A) ​it can worsen inflation. 
B) ​it can reduce asset prices. 
C) ​transaction costs are too high. 
D) ​it could lead to deflation. 
A) ​it can worsen inflation. 
B) ​it can reduce asset prices. 
C) ​transaction costs are too high. 
D) ​it could lead to deflation.

Question 8

If the public has correct rational expectations and the Fed reduces both reserve requirements and the discount rate, it would be expected to result in:

Accepted Answer

A) ​a higher level of real output and a lower price level. 
B) ​a lower price level but no change in real output. 
C) ​a higher price level and a reduced level of real output. 
D) ​a higher price level but no change in real output. 
A) ​a higher level of real output and a lower price level. 
B) ​a lower price level but no change in real output. 
C) ​a higher price level and a reduced level of real output. 
D) ​a higher price level but no change in real output.

Question 9

Critics of rational expectation theory believe:

Accepted Answer

A) ​most people are truly not very informed about the effects of a policy change. 
B) ​most people do not adjust their behavior very rapidly to changes in government policies, in part because they are not informed about the effects of policy changes. 
C) ​that wages and prices are not as flexible as the rational expectation theory assumes. 
D) ​all of the above. 
A) ​most people are truly not very informed about the effects of a policy change. 
B) ​most people do not adjust their behavior very rapidly to changes in government policies, in part because they are not informed about the effects of policy changes. 
C) ​that wages and prices are not as flexible as the rational expectation theory assumes. 
D) ​all of the above.

Question 10

If people expect economic fluctuations to be permanent and caused primarily by supply-side shifts, then the result is likely to be a positive relationship between the inflation rate and the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 11

Using Taylor rule, the federal funds rate is increased or decreased according to what is happening to both real GDP and inflation.

Accepted Answer

A) True 
 B)False

Question 12

When the short run aggregate supply curve shifts left, it ___ the short-run Phillips curve.

Accepted Answer

A) ​Moves the economy up along 
B) ​Moves the economy down along 
C) ​Shifts right 
D) ​Shifts left 
A) ​Moves the economy up along 
B) ​Moves the economy down along 
C) ​Shifts right 
D) ​Shifts left

Question 13

Higher than expected inflation rate:​

Accepted Answer

A) ​shifts short-run Phillips curve to the right. 
B) ​shifts long-run Phillips curve to the right. 
C) ​shifts both short-run and long-run Phillips curve to the right. 
D) ​shifts short-run Phillips curve to the left. 
A) ​shifts short-run Phillips curve to the right. 
B) ​shifts long-run Phillips curve to the right. 
C) ​shifts both short-run and long-run Phillips curve to the right. 
D) ​shifts short-run Phillips curve to the left.

Question 14

A.H. Phillips developed the Phillips curve concept by looking at the relationship between:

Accepted Answer

A) ​inflation and unemployment. 
B) ​wages and employment. 
C) ​wage inflation and monetary policy. 
D) ​inflation and output. 
A) ​inflation and unemployment. 
B) ​wages and employment. 
C) ​wage inflation and monetary policy. 
D) ​inflation and output.

Question 15

According to Milton Friedman, the short-run trade-off between unemployment and inflation comes from unanticipated inflation.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following believe that discretionary monetary policy and discretionary fiscal policy are effective countercyclical policy actions? activists

Accepted Answer

A) ​rule advocates 
B) ​activists 
C) ​new classical economists 
D) ​rational expectations theorists 
A) ​rule advocates 
B) ​activists 
C) ​new classical economists 
D) ​rational expectations theorists

Question 17

​Exhibit 19-1
​   ​
​
-Refer to Exhibit 19-1. If an increase in aggregate demand from AD0 to AD1 is fully anticipated, the economy will move from point A to point ____ in the short run.

Accepted Answer

A) ​B 
B) ​C 
C) ​D 
D) ​E 
A) ​B 
B) ​C 
C) ​D 
D) ​E

Question 18

The expectation of a lower inflation rate will cause:

Accepted Answer

A) ​the short-run Phillips curve to become vertical. 
B) ​the short-run Phillips curve to shift leftward. 
C) ​a movement down along a short-run Phillips curve. 
D) ​the short-run Phillips curve to shift rightward. 
A) ​the short-run Phillips curve to become vertical. 
B) ​the short-run Phillips curve to shift leftward. 
C) ​a movement down along a short-run Phillips curve. 
D) ​the short-run Phillips curve to shift rightward.

Question 19

Which of the following would move the economy up and to the left along a short run Phillips Curve?

Accepted Answer

A) ​Increases in the discount rate and increases in the interest rate the Fed pays on bank reserves. 
B) ​Increases in taxes by the federal government combined with reductions in government purchases of goods and services. 
C) ​Decreases in the fed funds interest rate target adopted by the Fed. 
D) ​An increase in the expected rate of inflation. 
A) ​Increases in the discount rate and increases in the interest rate the Fed pays on bank reserves. 
B) ​Increases in taxes by the federal government combined with reductions in government purchases of goods and services. 
C) ​Decreases in the fed funds interest rate target adopted by the Fed. 
D) ​An increase in the expected rate of inflation.

Question 20

Movements up along a particular short run Phillips curve ____ consistent with movements up along a short run aggregate supply curve; movements to the right along a particular short run Phillips curve ____ consistent with movements to the right along a short run aggregate supply curve;​

Accepted Answer

A) ​Are; are 
B) ​Are; are not 
C) ​Are not; are 
D) ​Are not; are not 
A) ​Are; are 
B) ​Are; are not 
C) ​Are not; are 
D) ​Are not; are not

Exam 19: Measuring Economic Performance

Which of the following is true?​

If inflation rises or falls faster than people forecast in the short run but not in the long run, what are the shapes of the Phillips curves?

What do rational expectations theorists believe? What is their critics' point of view?

With rational expectations, a policy that would increase AD would lead to:

If the public has rational expectations, an attempt to increase aggregate demand to stimulate the economy will:

When the short run aggregate supply curve shifts right, it ___ the short-run Phillips curve.​

A main argument against indexing is that:

If the public has correct rational expectations and the Fed reduces both reserve requirements and the discount rate, it would be expected to result in:

Critics of rational expectation theory believe:

If people expect economic fluctuations to be permanent and caused primarily by supply-side shifts, then the result is likely to be a positive relationship between the inflation rate and the unemployment rate.

Using Taylor rule, the federal funds rate is increased or decreased according to what is happening to both real GDP and inflation.

When the short run aggregate supply curve shifts left, it ___ the short-run Phillips curve.

Higher than expected inflation rate:​

A.H. Phillips developed the Phillips curve concept by looking at the relationship between:

According to Milton Friedman, the short-run trade-off between unemployment and inflation comes from unanticipated inflation.

Which of the following believe that discretionary monetary policy and discretionary fiscal policy are effective countercyclical policy actions? activists

​Exhibit 19-1 ​ ​ ​ -Refer to Exhibit 19-1. If an increase in aggregate demand from AD0 to AD1 is fully anticipated, the economy will move from point A to point ____ in the short run.

The expectation of a lower inflation rate will cause:

Which of the following would move the economy up and to the left along a short run Phillips Curve?

Movements up along a particular short run Phillips curve ____ consistent with movements up along a short run aggregate supply curve; movements to the right along a particular short run Phillips curve ____ consistent with movements to the right along a short run aggregate supply curve;​

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

Which of the following is true?

When the short run aggregate supply curve shifts right, it ___ the short-run Phillips curve.

Higher than expected inflation rate:

Exhibit 19-1 -Refer to Exhibit 19-1. If an increase in aggregate demand from AD₀ to AD₁ is fully anticipated, the economy will move from point A to point ____ in the short run.

Movements up along a particular short run Phillips curve consistent with movements up along a short run aggregate supply curve; movements to the right along a particular short run Phillips curve consistent with movements to the right along a short run aggregate supply curve;