Question 1

Data for the United States traced out an almost perfect Phillips curve for much of the

Accepted Answer

A)  1960s. 
B)  1970s. 
C)  1980s. 
D)  1990s. 
A)  1960s. 
B)  1970s. 
C)  1980s. 
D)  1990s.

Question 2

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)  unemployment and inflation are higher. 
B)  unemployment and inflation are lower. 
C)  unemployment is higher and inflation is lower. 
D)  unemployment is lower and inflation is higher. 
A)  unemployment and inflation are higher. 
B)  unemployment and inflation are lower. 
C)  unemployment is higher and inflation is lower. 
D)  unemployment is lower and inflation is higher.

Question 3

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Accepted Answer

Eventually the economy moves back to the

Question 4

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Accepted Answer

A)  and the inflation rate rise. 
B)  and the inflation rate fall. 
C)  rises and the inflation rate falls. 
D)  falls and the inflation rate rises. 
A)  and the inflation rate rise. 
B)  and the inflation rate fall. 
C)  rises and the inflation rate falls. 
D)  falls and the inflation rate rises.

Question 5

Figure 35-7
Use the two graphs in the diagram to answer the following questions.
    
-Refer to Figure 35-7. The economy would move from 3 to 5

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly. 
B)  in the short run if money supply growth decreased unexpectedly. 
C)  in the long run if money supply growth increases. 
D)  in the long run if money supply growth decreases. 
A)  in the short run if money supply growth increased unexpectedly. 
B)  in the short run if money supply growth decreased unexpectedly. 
C)  in the long run if money supply growth increases. 
D)  in the long run if money supply growth decreases.

Question 6

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

Accepted Answer

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

Question 7

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Accepted Answer

A)  it seemed to work for wages but not for inflation. 
B)  monetary policy was ineffective in combating inflation. 
C)  the Phillips curve did not apply in the long run. 
D)  Phillips had made errors in collecting his data. 
A)  it seemed to work for wages but not for inflation. 
B)  monetary policy was ineffective in combating inflation. 
C)  the Phillips curve did not apply in the long run. 
D)  Phillips had made errors in collecting his data.

Question 8

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, U represents the unemployment rate.
    
-Refer to Figure 35-1. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to

Accepted Answer

A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph. 
A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph.

Question 9

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

Accepted Answer

A)  to a lower unemployment rate and a lower inflation rate than policy B. 
B)  to a lower unemployment rate and a higher inflation rate than policy B. 
C)  to a higher unemployment rate and lower inflation rate than policy B. 
D)  to a higher unemployment rate and higher inflation rate than policy B. 
A)  to a lower unemployment rate and a lower inflation rate than policy B. 
B)  to a lower unemployment rate and a higher inflation rate than policy B. 
C)  to a higher unemployment rate and lower inflation rate than policy B. 
D)  to a higher unemployment rate and higher inflation rate than policy B.

Question 10

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Accepted Answer

The price level and output ris

Question 11

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Accepted Answer

A) True 
 B)False

Question 12

According to the Phillips curve, policymakers can reduce inflation by

Accepted Answer

A)  contracting aggregate demand. This contraction results in a temporarily higher unemployment rate. 
B)  contracting aggregate demand. This contraction results in a temporarily lower unemployment rate. 
C)  expanding aggregate demand. This expansion results in a temporarily lower unemployment rate. 
D)  expanding aggregate demand. This expansion results in a temporarily higher unemployment rate. 
A)  contracting aggregate demand. This contraction results in a temporarily higher unemployment rate. 
B)  contracting aggregate demand. This contraction results in a temporarily lower unemployment rate. 
C)  expanding aggregate demand. This expansion results in a temporarily lower unemployment rate. 
D)  expanding aggregate demand. This expansion results in a temporarily higher unemployment rate.

Question 13

In the long run, an increase in the money supply growth rate

Accepted Answer

A)  raises expected inflation so the short-run Phillips curve shifts right. 
B)  raises expected inflation so the short-run Phillips curve shifts left. 
C)  reduces expected inflation so the short-run Phillips curve shifts left. 
D)  None of the above is correct. 
A)  raises expected inflation so the short-run Phillips curve shifts right. 
B)  raises expected inflation so the short-run Phillips curve shifts left. 
C)  reduces expected inflation so the short-run Phillips curve shifts left. 
D)  None of the above is correct.

Question 14

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, U represents the unemployment rate.
    
-Refer to Figure 35-1. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Accepted Answer

A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph. 
A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph.

Question 15

In the late 1960s, economist Edmund Phelps published a paper that

Accepted Answer

A)  argued that there was no long-run tradeoff between inflation and unemployment. 
B)  disproved Friedman's claim that monetary policy was effective in controlling inflation. 
C)  showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent. 
D)  argued that the Phillips curve was stable and that it would not shift. 
A)  argued that there was no long-run tradeoff between inflation and unemployment. 
B)  disproved Friedman's claim that monetary policy was effective in controlling inflation. 
C)  showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent. 
D)  argued that the Phillips curve was stable and that it would not shift.

Question 16

If people believe that the central bank is going to reduce inflation, then

Accepted Answer

A)  the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B)  the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C)  the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D)  the short-run Phillips curve shifts left and the sacrifice ratio will fall. 
A)  the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B)  the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C)  the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D)  the short-run Phillips curve shifts left and the sacrifice ratio will fall.

Question 17

Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short- run consequence of this contraction?

Accepted Answer

A)  The inflation rate decreases. 
B)  The level of output decreases. 
C)  The unemployment rate increases. 
D)  All of the above are correct. 
A)  The inflation rate decreases. 
B)  The level of output decreases. 
C)  The unemployment rate increases. 
D)  All of the above are correct.

Question 18

In 1979, Fed chair Paul Volcker decided to pursue a policy

Accepted Answer

A)  that would lead to disinflation. 
B)  that would create falling prices. 
C)  to accommodate continuing adverse supply shocks. 
D)  that maintained money growth at its current level. 
A)  that would lead to disinflation. 
B)  that would create falling prices. 
C)  to accommodate continuing adverse supply shocks. 
D)  that maintained money growth at its current level.

Question 19

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is correct concerning the long-run Phillips curve?

Accepted Answer

A)  Its position is determined primarily by monetary factors. 
B)  If it shifts right, long-run aggregate supply shifts right. 
C)  It cannot be changed by any government policy. 
D)  Its position depends on the natural rate of unemployment. 
A)  Its position is determined primarily by monetary factors. 
B)  If it shifts right, long-run aggregate supply shifts right. 
C)  It cannot be changed by any government policy. 
D)  Its position depends on the natural rate of unemployment.

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

Data for the United States traced out an almost perfect Phillips curve for much of the

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from 3 to 5

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

According to the Phillips curve, policymakers can reduce inflation by

In the long run, an increase in the money supply growth rate

In the late 1960s, economist Edmund Phelps published a paper that

If people believe that the central bank is going to reduce inflation, then

Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short- run consequence of this contraction?

In 1979, Fed chair Paul Volcker decided to pursue a policy

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Which of the following is correct concerning the long-run Phillips curve?

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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