Question 1

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Accepted Answer

A) True 
 B)False

Question 2

Figure 35-3. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.    
-Refer to Figure 35-3. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the right-hand graph. The price level in the year 2018 is

Accepted Answer

A)  155.56. 
B)  159.00. 
C)  163.50. 
D)  170.04. 
A)  155.56. 
B)  159.00. 
C)  163.50. 
D)  170.04.

Question 3

Disinflation is defined as a

Accepted Answer

A)  zero rate of inflation. 
B)  constant rate of inflation. 
C)  reduction in the rate of inflation. 
D)  negative rate of inflation. 
A)  zero rate of inflation. 
B)  constant rate of inflation. 
C)  reduction in the rate of inflation. 
D)  negative rate of inflation.

Question 4

In his famous article published in an economics journal in 1958, A.W. Phillips

Accepted Answer

A)  used data for the United States to show a negative relationship between the rate of change of the U.S. consumer price index and the U.S. unemployment rate. 
B)  used data for the United States to show a negative relationship between the rate of change of wages in the U.S. and the U.S. unemployment rate. 
C)  used data for the United Kingdom to show a negative relationship between the rate of change of the U.K. consumer price index and the U.K. unemployment rate. 
D)  used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate. 
A)  used data for the United States to show a negative relationship between the rate of change of the U.S. consumer price index and the U.S. unemployment rate. 
B)  used data for the United States to show a negative relationship between the rate of change of wages in the U.S. and the U.S. unemployment rate. 
C)  used data for the United Kingdom to show a negative relationship between the rate of change of the U.K. consumer price index and the U.K. unemployment rate. 
D)  used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate.

Question 5

Figure 35-2
Use the pair of diagrams below to answer the following questions.
    
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves the economy to

Accepted Answer

A)  E and 1. 
B)  D and 2. 
C)  D and 3. 
D)  None of the above is correct. 
A)  E and 1. 
B)  D and 2. 
C)  D and 3. 
D)  None of the above is correct.

Question 6

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Accepted Answer

A)  consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation. 
B)  consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation. 
C)  inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation. 
D)  inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation. 
A)  consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation. 
B)  consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation. 
C)  inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation. 
D)  inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation.

Question 7

If policymakers increase aggregate demand, then in the short run the price level

Accepted Answer

A)  falls and unemployment rises. 
B)  and unemployment fall. 
C)  and unemployment rise. 
D)  rises and unemployment falls. 
A)  falls and unemployment rises. 
B)  and unemployment fall. 
C)  and unemployment rise. 
D)  rises and unemployment falls.

Question 8

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Accepted Answer

A)  Mark gets an increase in his nominal wage. 
B)  Bob gets more job offers. 
C)  Susan reduces prices at her pizza restaurant. 
D)  Tom reads that the central bank recently raised the money supply 
A)  Mark gets an increase in his nominal wage. 
B)  Bob gets more job offers. 
C)  Susan reduces prices at her pizza restaurant. 
D)  Tom reads that the central bank recently raised the money supply

Question 9

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Accepted Answer

A)  falls, so there are upward pressures on wages and prices. 
B)  falls, so there are downward pressures on wages and prices. 
C)  rises, so there are upward pressures on wages and prices. 
D)  rises, so there are downward pressures on wages and prices. 
A)  falls, so there are upward pressures on wages and prices. 
B)  falls, so there are downward pressures on wages and prices. 
C)  rises, so there are upward pressures on wages and prices. 
D)  rises, so there are downward pressures on wages and prices.

Question 10

Over the long run the Volcker disinflation

Accepted Answer

A)  shifted the short-run and long-run Phillips curves left. 
B)  shifted the short-run, but not the long-run Phillips curve left. 
C)  shifted the long-run, but not the short-run Phillips curve left. 
D)  None of the above is correct. 
A)  shifted the short-run and long-run Phillips curves left. 
B)  shifted the short-run, but not the long-run Phillips curve left. 
C)  shifted the long-run, but not the short-run Phillips curve left. 
D)  None of the above is correct.

Question 11

Suppose, as in the 1970's in the U.S., that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force. Would this have any effect on the long-run Phillips curve?

Accepted Answer

Since this would raise the nat

Question 12

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

Accepted Answer

A)  4 percent of annual output. 
B)  8 percent of annual output. 
C)  12 percent of annual output. 
D)  16 percent of annual output. 
A)  4 percent of annual output. 
B)  8 percent of annual output. 
C)  12 percent of annual output. 
D)  16 percent of annual output.

Question 13

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%, then

Accepted Answer

A)  unemployment falls but it would have fallen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
B)  unemployment falls but it would have fallen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
C)  unemployment rises but it would have risen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
D)  unemployment rises but it would have risen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
A)  unemployment falls but it would have fallen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
B)  unemployment falls but it would have fallen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
C)  unemployment rises but it would have risen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%. 
D)  unemployment rises but it would have risen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%.

Question 14

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

A)  downward pressures on prices and wages. 
B)  downward pressures on prices and upward pressures on wages. 
C)  upward pressures on prices and downward pressures on wages. 
D)  upward pressures on prices and wages. 
A)  downward pressures on prices and wages. 
B)  downward pressures on prices and upward pressures on wages. 
C)  upward pressures on prices and downward pressures on wages. 
D)  upward pressures on prices and wages.

Question 15

The large increase in oil prices in the 1970s was caused primarily by an)

Accepted Answer

A)  increase in demand for oil. 
B)  decrease in demand for oil. 
C)  decrease in the supply of oil. 
D)  increase in the supply of oil. 
A)  increase in demand for oil. 
B)  decrease in demand for oil. 
C)  decrease in the supply of oil. 
D)  increase in the supply of oil.

Question 16

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Accepted Answer

A)  low, so there was upward pressure on wages and prices. 
B)  low, so there was downward pressure on wages and prices. 
C)  high, so there was upward pressure on wages and prices. 
D)  high, so there was downward pressure on wages and prices. 
A)  low, so there was upward pressure on wages and prices. 
B)  low, so there was downward pressure on wages and prices. 
C)  high, so there was upward pressure on wages and prices. 
D)  high, so there was downward pressure on wages and prices.

Question 17

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Accepted Answer

A) True 
 B)False

Question 18

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)  reduced both unemployment and inflation. 
B)  reduced inflation significantly, but at the cost of a severe recession. 
C)  reduced unemployment significantly, but at the cost of higher inflation. 
D)  raised both unemployment and inflation. 
A)  reduced both unemployment and inflation. 
B)  reduced inflation significantly, but at the cost of a severe recession. 
C)  reduced unemployment significantly, but at the cost of higher inflation. 
D)  raised both unemployment and inflation.

Question 19

To say that the natural rate of unemployment changes over time is to say that

Accepted Answer

A)  the short-run Phillips curve shifts over time. 
B)  the long-run Phillips curve shifts over time. 
C)  the aggregate demand curve shifts over time. 
D)  the Federal Reserve influences the natural rate of unemployment over time. 
A)  the short-run Phillips curve shifts over time. 
B)  the long-run Phillips curve shifts over time. 
C)  the aggregate demand curve shifts over time. 
D)  the Federal Reserve influences the natural rate of unemployment over time.

Question 20

If the central bank decreases the money supply, then in the short run prices

Accepted Answer

A)  rise and unemployment falls. 
B)  fall and unemployment rises. 
C)  and unemployment rise. 
D)  and unemployment fall. 
A)  rise and unemployment falls. 
B)  fall and unemployment rises. 
C)  and unemployment rise. 
D)  and unemployment fall.

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Disinflation is defined as a

In his famous article published in an economics journal in 1958, A.W. Phillips

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves the economy to

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

If policymakers increase aggregate demand, then in the short run the price level

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Over the long run the Volcker disinflation

Suppose, as in the 1970's in the U.S., that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force. Would this have any effect on the long-run Phillips curve?

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%, then

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

The large increase in oil prices in the 1970s was caused primarily by an)

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

The restrictive monetary policy followed by the Fed in the early 1980s

To say that the natural rate of unemployment changes over time is to say that

If the central bank decreases the money supply, then in the short run prices

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

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