Question 1

In the long run, if the Fed decreases the rate at which it increases the money supply,

Accepted Answer

A)  inflation and unemployment will be higher. 
B)  inflation will be higher and unemployment will be lower. 
C)  inflation will be lower and unemployment will be higher. 
D)  None of the above is correct. 
A)  inflation and unemployment will be higher. 
B)  inflation will be higher and unemployment will be lower. 
C)  inflation will be lower and unemployment will be higher. 
D)  None of the above is correct.

Question 2

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A)  right, so that at any inflation rate unemployment is higher in the short run than before. 
B)  left, so that at any inflation rate unemployment is higher in the short run than before. 
C)  right, so that at any inflation rate unemployment is lower in the short run than before. 
D)  left, so that at any inflation rate unemployment is lower in the short run than before. 
A)  right, so that at any inflation rate unemployment is higher in the short run than before. 
B)  left, so that at any inflation rate unemployment is higher in the short run than before. 
C)  right, so that at any inflation rate unemployment is lower in the short run than before. 
D)  left, so that at any inflation rate unemployment is lower in the short run than before.

Question 3

A policy that raised the natural rate of unemployment would shift

Accepted Answer

A)  both the short-run and the long-run Phillips curves to the right. 
B)  the short-run Phillips curve right but leave the long-run Phillips curve unchanged. 
C)  the long-run Phillips curve right but leave the short-run Phillips curve unchanged. 
D)  neither the long-run Phillips curve nor the short-run Phillips curve right. 
A)  both the short-run and the long-run Phillips curves to the right. 
B)  the short-run Phillips curve right but leave the long-run Phillips curve unchanged. 
C)  the long-run Phillips curve right but leave the short-run Phillips curve unchanged. 
D)  neither the long-run Phillips curve nor the short-run Phillips curve right.

Question 4

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Accepted Answer

The Phillips curve shows the relation be

Question 5

Which of the following depends primarily on the growth rate of the money supply?

Accepted Answer

A)  inflation and the natural rate of unemployment 
B)  inflation but not the natural rate of unemployment 
C)  the natural rate of unemployment but not inflation 
D)  neither inflation nor the natural rate of unemployment 
A)  inflation and the natural rate of unemployment 
B)  inflation but not the natural rate of unemployment 
C)  the natural rate of unemployment but not inflation 
D)  neither inflation nor the natural rate of unemployment

Question 6

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Accepted Answer

A decrease in the growth rate of the mon

Question 7

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

Accepted Answer

A)  both the short-run and the long-run Phillips curves 
B)  neither the short-run nor the long-run Phillips curves 
C)  only the short-run Phillips curve 
D)  only the long-run Phillips curve 
A)  both the short-run and the long-run Phillips curves 
B)  neither the short-run nor the long-run Phillips curves 
C)  only the short-run Phillips curve 
D)  only the long-run Phillips curve

Question 8

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

Accepted Answer

A)  Teresa reads in the newspaper that the central bank recently raised the money supply. 
B)  Jackie gets fewer job offers. 
C)  Miguel makes larger increases in the prices at his health food store. 
D)  Julie's nominal wage increase is larger. 
A)  Teresa reads in the newspaper that the central bank recently raised the money supply. 
B)  Jackie gets fewer job offers. 
C)  Miguel makes larger increases in the prices at his health food store. 
D)  Julie's nominal wage increase is larger.

Question 9

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A)  increase the rate at which the money supply increases. This will also move inflation closer to its previous rate.. 
B)  increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate 
C)  decrease the rate at which the money supply increases. This will also move inflation closer to its original rate 
D)  decrease the rate at which the money supply increases. However, this will make higher than its previous rate. 
A)  increase the rate at which the money supply increases. This will also move inflation closer to its previous rate.. 
B)  increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate 
C)  decrease the rate at which the money supply increases. This will also move inflation closer to its original rate 
D)  decrease the rate at which the money supply increases. However, this will make higher than its previous rate.

Question 10

Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run

Accepted Answer

A)  the natural rate of unemployment rises. 
B)  the natural rate of unemployment falls. 
C)  the unemployment rate will be above its natural rate. 
D)  the unemployment rate will be below its natural rate. 
A)  the natural rate of unemployment rises. 
B)  the natural rate of unemployment falls. 
C)  the unemployment rate will be above its natural rate. 
D)  the unemployment rate will be below its natural rate.

Question 11

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 12

If the central bank keeps the money supply growth rate constant, but people raise their inflation expectations by 1 percentage point, then the short-run Phillips curve shifts

Accepted Answer

A)  right and the unemployment rate rises. 
B)  right and the unemployment rate falls. 
C)  left and the unemployment rate rises. 
D)  left and the unemployment rate falls. 
A)  right and the unemployment rate rises. 
B)  right and the unemployment rate falls. 
C)  left and the unemployment rate rises. 
D)  left and the unemployment rate falls.

Question 13

Which of the following is not associated with an adverse supply shock?

Accepted Answer

A)  the short-run Phillips curve shifts left 
B)  unemployment rises 
C)  the price level rises 
D)  output falls 
A)  the short-run Phillips curve shifts left 
B)  unemployment rises 
C)  the price level rises 
D)  output falls

Question 14

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A)  inflation but not the unemployment rate; this is consistent with classical theory. 
B)  inflation but not the unemployment rate; this is inconsistent with classical theory. 
C)  the unemployment rate but not inflation; this is consistent with classical theory. 
D)  the unemployment rate but not inflation; this is inconsistent with classical theory. 
A)  inflation but not the unemployment rate; this is consistent with classical theory. 
B)  inflation but not the unemployment rate; this is inconsistent with classical theory. 
C)  the unemployment rate but not inflation; this is consistent with classical theory. 
D)  the unemployment rate but not inflation; this is inconsistent with classical theory.

Question 15

Ultimately, the change in unemployment associated with a change in inflation is due to

Accepted Answer

A)  the shape of the long-run aggregate supply curve. 
B)  unanticipated inflation, not inflation per se. 
C)  anticipated inflation, not inflation per se. 
D)  a change in the natural rate of unemployment. 
A)  the shape of the long-run aggregate supply curve. 
B)  unanticipated inflation, not inflation per se. 
C)  anticipated inflation, not inflation per se. 
D)  a change in the natural rate of unemployment.

Question 16

Typical estimates of the sacrifice ratio suggest that a one-percentage-point reduction in the inflation rate requires

Accepted Answer

A)  a sacrifice of 5 percent of annual output. 
B)  a sacrifice of 5 percent of government spending. 
C)  an increase in the unemployment rate of 5 percentage points. 
D)  a 5 percent increase in the government budget deficit. 
A)  a sacrifice of 5 percent of annual output. 
B)  a sacrifice of 5 percent of government spending. 
C)  an increase in the unemployment rate of 5 percentage points. 
D)  a 5 percent increase in the government budget deficit.

Question 17

In the long run, policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level. 
B)  neither unemployment nor the price level. 
C)  only unemployment. 
D)  only the price level. 
A)  both unemployment and the price level. 
B)  neither unemployment nor the price level. 
C)  only unemployment. 
D)  only the price level.

Question 18

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

Accepted Answer

A) True 
 B)False

Question 19

A central bank announces it will decrease the inflation rate by 10 percentage points. People are skeptical of the announcement, but do expect the central bank will reduce inflation by 5 percentage points and so expected inflation falls by 5 percentage points. If the central bank decreases inflation by only 3 percentage points then the unemployment rate will fall.

Accepted Answer

A) True 
 B)False

Question 20

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%. Then

Accepted Answer

A)  unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation. 
B)  unemployment falls, but it would have fallen more if people had been expecting 25% inflation. 
C)  unemployment rises, but it would have risen more if people had been expecting 12.5% inflation. 
D)  unemployment rises, but it would have risen more if people had been expecting 25% inflation. 
A)  unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation. 
B)  unemployment falls, but it would have fallen more if people had been expecting 25% inflation. 
C)  unemployment rises, but it would have risen more if people had been expecting 12.5% inflation. 
D)  unemployment rises, but it would have risen more if people had been expecting 25% inflation.

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

In the long run, if the Fed decreases the rate at which it increases the money supply,

If inflation expectations rise, the short-run Phillips curve shifts

A policy that raised the natural rate of unemployment would shift

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Which of the following depends primarily on the growth rate of the money supply?

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

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

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

If the central bank keeps the money supply growth rate constant, but people raise their inflation expectations by 1 percentage point, then the short-run Phillips curve shifts

Which of the following is not associated with an adverse supply shock?

According to the long-run Phillips curve, in the long run monetary policy influences

Ultimately, the change in unemployment associated with a change in inflation is due to

Typical estimates of the sacrifice ratio suggest that a one-percentage-point reduction in the inflation rate requires

In the long run, policy that changes aggregate demand changes

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

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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