Question 1

Samuelson and Solow argued that when unemployment is high,

Accepted Answer

A)  aggregate demand is high, which puts upward pressure on wages and prices. 
B)  aggregate demand is high, which puts downward pressure on wages and prices. 
C)  aggregate demand is low, which puts upward pressure on wages and prices. 
D)  aggregate demand is low, which puts downward pressure on wages and prices. 
A)  aggregate demand is high, which puts upward pressure on wages and prices. 
B)  aggregate demand is high, which puts downward pressure on wages and prices. 
C)  aggregate demand is low, which puts upward pressure on wages and prices. 
D)  aggregate demand is low, which puts downward pressure on wages and prices.

Question 2

If policymakers decrease aggregate demand, then in the long run

Accepted Answer

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

Question 3

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly, on average the public thought

Accepted Answer

A)  he would try to fool them by raising inflation to decrease unemployment. 
B)  inflation would be unchanged. 
C)  inflation would fall but not by as much or as quickly as Volcker claimed. 
D)  inflation would fall even further than Volcker was willing to admit. 
A)  he would try to fool them by raising inflation to decrease unemployment. 
B)  inflation would be unchanged. 
C)  inflation would fall but not by as much or as quickly as Volcker claimed. 
D)  inflation would fall even further than Volcker was willing to admit.

Question 4

Friedman and Phelps argued that

Accepted Answer

A)  if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. 
B)  if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D)  None of the above is correct. 
A)  if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. 
B)  if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D)  None of the above is correct.

Question 5

If a central bank decreases the money supply, then

Accepted Answer

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

Question 6

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Accepted Answer

They are consistent with the long-run Ph

Question 7

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Accepted Answer

A)  short run, and the natural rate is constant over time. 
B)  long run, and the natural rate is constant over time. 
C)  short run, and the natural rate changes over time. 
D)  long run, and the natural rate changes over time. 
A)  short run, and the natural rate is constant over time. 
B)  long run, and the natural rate is constant over time. 
C)  short run, and the natural rate changes over time. 
D)  long run, and the natural rate changes over time.

Question 8

On a given short-run Phillips curve which of the following is held constant?

Accepted Answer

A)  the level of GDP 
B)  the unemployment rate 
C)  expected inflation 
D)  employment 
A)  the level of GDP 
B)  the unemployment rate 
C)  expected inflation 
D)  employment

Question 9

In the long run,

Accepted Answer

A)  the natural rate of unemployment depends primarily on the level of aggregate demand. 
B)  inflation depends primarily upon the money supply growth rate. 
C)  there is a tradeoff between the inflation rate and the natural rate of unemployment. 
D)  All of the above are correct. 
A)  the natural rate of unemployment depends primarily on the level of aggregate demand. 
B)  inflation depends primarily upon the money supply growth rate. 
C)  there is a tradeoff between the inflation rate and the natural rate of unemployment. 
D)  All of the above are correct.

Question 10

If consumer confidence rises, then aggregate demand shifts

Accepted Answer

A)  right, making inflation higher than otherwise. 
B)  right, making inflation lower than otherwise. 
C)  left, making inflation higher than otherwise. 
D)  left, making inflation lower than otherwise. 
A)  right, making inflation higher than otherwise. 
B)  right, making inflation lower than otherwise. 
C)  left, making inflation higher than otherwise. 
D)  left, making inflation lower than otherwise.

Question 11

How are the effects of the financial crisis shown using the Phillips curve diagram?

Accepted Answer

As a move down along

Question 12

Which of the following is downward-sloping?

Accepted Answer

A)  both the long-run Phillips curve and the long-run aggregate-supply curve 
B)  neither the long-run Phillips curve nor the long-run aggregate-supply curve 
C)  the long-run Phillips curve, but not the long-run aggregate-supply curve 
D)  the short-run Phillips curve, but not the long-run aggregate-supply curve 
A)  both the long-run Phillips curve and the long-run aggregate-supply curve 
B)  neither the long-run Phillips curve nor the long-run aggregate-supply curve 
C)  the long-run Phillips curve, but not the long-run aggregate-supply curve 
D)  the short-run Phillips curve, but not the long-run aggregate-supply curve

Question 13

Moving from the late 1960s to 1970-1973,

Accepted Answer

A)  inflation remained high while the unemployment rate was lower than in the late 1960s. 
B)  inflation remained high while the unemployment rate was higher than in the late 1960s. 
C)  inflation remained low while the unemployment rate was lower than in the late 1960s. 
D)  inflation remained low while the unemployment rate was higher than in the late 1960s. 
A)  inflation remained high while the unemployment rate was lower than in the late 1960s. 
B)  inflation remained high while the unemployment rate was higher than in the late 1960s. 
C)  inflation remained low while the unemployment rate was lower than in the late 1960s. 
D)  inflation remained low while the unemployment rate was higher than in the late 1960s.

Question 14

A favorable supply shock causes the price level to

Accepted Answer

A)  rise. To counter this a central bank would increase the money supply. 
B)  rise. To counter this a central bank would decrease the money supply. 
C)  fall. To counter this a central bank would increase the money supply. 
D)  fall. To counter this a central bank would decrease the money supply. 
A)  rise. To counter this a central bank would increase the money supply. 
B)  rise. To counter this a central bank would decrease the money supply. 
C)  fall. To counter this a central bank would increase the money supply. 
D)  fall. To counter this a central bank would decrease the money supply.

Question 15

If a central bank announced that it was going to decrease inflation by 5%, people revised their inflation expectations downward by 4%, and the central bank only lowered inflation by 1%, the short run Phillips curve would shift

Accepted Answer

A)  right and unemployment would rise. 
B)  right and unemployment would fall. 
C)  left and unemployment would rise. 
D)  left and unemployment would fall. 
A)  right and unemployment would rise. 
B)  right and unemployment would fall. 
C)  left and unemployment would rise. 
D)  left and unemployment would fall.

Question 16

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Accepted Answer

A)  both the short and long run. 
B)  the short run, but not the long run. 
C)  the long run, but not the short run. 
D)  neither the short nor the long run. 
A)  both the short and long run. 
B)  the short run, but not the long run. 
C)  the long run, but not the short run. 
D)  neither the short nor the long run.

Question 17

Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

Accepted Answer

A)  The short-run Phillips curve would shift to the left. 
B)  The short-run Phillips curve would shift to the right. 
C)  The economy would move up and to the left along a given short-run Phillips curve. 
D)  The economy would move down and to the right along a given short-run Phillips curve. 
A)  The short-run Phillips curve would shift to the left. 
B)  The short-run Phillips curve would shift to the right. 
C)  The economy would move up and to the left along a given short-run Phillips curve. 
D)  The economy would move down and to the right along a given short-run Phillips curve.

Question 18

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

Accepted Answer

The short-run Phillips curve s

Question 19

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

Accepted Answer

A)  shifts both the long-run and the short-run Phillips curves right. 
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D)  None of the above is correct. 
A)  shifts both the long-run and the short-run Phillips curves right. 
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D)  None of the above is correct.

Question 20

Which of the following is not correct?

Accepted Answer

A)  In the short run, policymakers face a tradeoff between inflation and unemployment. 
B)  Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left. 
C)  Unemployment can be changed only by the use of government policy. 
D)  The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible. 
A)  In the short run, policymakers face a tradeoff between inflation and unemployment. 
B)  Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left. 
C)  Unemployment can be changed only by the use of government policy. 
D)  The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible.

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

Samuelson and Solow argued that when unemployment is high,

If policymakers decrease aggregate demand, then in the long run

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly, on average the public thought

Friedman and Phelps argued that

If a central bank decreases the money supply, then

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

On a given short-run Phillips curve which of the following is held constant?

In the long run,

If consumer confidence rises, then aggregate demand shifts

How are the effects of the financial crisis shown using the Phillips curve diagram?

Which of the following is downward-sloping?

Moving from the late 1960s to 1970-1973,

A favorable supply shock causes the price level to

If a central bank announced that it was going to decrease inflation by 5%, people revised their inflation expectations downward by 4%, and the central bank only lowered inflation by 1%, the short run Phillips curve would shift

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

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

Which of the following is not correct?

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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