Question 1

Figure 35-4 
-Refer to Figure 35-4. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Accepted Answer

A) 3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
B) 3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 3% inflation. 
C) 7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation. 
D) 7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.

Question 2

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 answer of Government expenditures increase. What happens to the...

Question 3

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 4

Figure 35-3  ​
​
-Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Accepted Answer

A) stays at C. 
B) moves to B. 
C) moves to A. 
D) moves to D.

Question 5

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 6

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Accepted Answer

A) raised inflation and unemployment. 
B) raised inflation and reduced unemployment. 
C) reduced inflation and raised unemployment. 
D) reduced inflation and unemployment.

Question 7

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Accepted Answer

The answer of Explain the connection between the vertical long-run...

Question 8

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Accepted Answer

A) True 
 B)False

Question 9

Write the equation representing the short-run Phillips curve.

Accepted Answer

The answer of Write the equation representing the short-run Phillips...

Question 10

When monetary and fiscal policymakers expand aggregate demand, which of the following costs to the economy is incurred in the short run?

Accepted Answer

A) Short-run aggregate supply decreases. 
B) The natural rate of unemployment increases. 
C) The price level increases. 
D) The money supply decreases.

Question 11

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that a central bank reduces the money supply growth rate to disinflate. What does disinflation mean? If people do not alter their inflation expectations, what happens to output and unemployment?

Accepted Answer

The answer of Suppose that a central bank reduces the...

Question 13

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Accepted Answer

A) True 
 B)False

Question 14

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Accepted Answer

A) True 
 B)False

Question 15

Disinflation would eventually cause

Accepted Answer

A) the short-run and the long-run Phillips curve to shift right. 
B) the short-run and the long-run Phillips curve to shift left. 
C) the short-run Phillips curve, but not the long-run Phillips curve, to shift right. 
D) the short-run Phillips curve, but not the long-run Phillips curve, to shift left.

Question 16

A change in expected inflation shifts

Accepted Answer

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

Question 17

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Accepted Answer

A) True 
 B)False

Question 18

​In a famous article published in 1958, A.W. Phillips 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.

Accepted Answer

A) True 
 B)False

Question 19

Figure 35-5  
-Refer to Figure 35-5. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Accepted Answer

A) the outcome of a favorable supply shock. 
B) falling inflation. 
C) stagflation. 
D) hyperinflation.

Question 20

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Accepted Answer

The answer of Assume the natural rate of unemployment is...

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

Figure 35-4 -Refer to Figure 35-4. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

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.

Figure 35-3 -Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, in the long run the economy

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Write the equation representing the short-run Phillips curve.

When monetary and fiscal policymakers expand aggregate demand, which of the following costs to the economy is incurred in the short run?

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

Suppose that a central bank reduces the money supply growth rate to disinflate. What does disinflation mean? If people do not alter their inflation expectations, what happens to output and unemployment?

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Disinflation would eventually cause

A change in expected inflation shifts

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

In a famous article published in 1958, A.W. Phillips 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.

Figure 35-5 -Refer to Figure 35-5. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

Figure 35-4 -Refer to Figure 35-4. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

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.

Figure 35-3 ​ ​ -Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, in the long run the economy

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Write the equation representing the short-run Phillips curve.

When monetary and fiscal policymakers expand aggregate demand, which of the following costs to the economy is incurred in the short run?

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

Suppose that a central bank reduces the money supply growth rate to disinflate. What does disinflation mean? If people do not alter their inflation expectations, what happens to output and unemployment?

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Disinflation would eventually cause

A change in expected inflation shifts

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

​In a famous article published in 1958, A.W. Phillips 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.

Figure 35-5 -Refer to Figure 35-5. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Figure 35-3 -Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, in the long run the economy

In a famous article published in 1958, A.W. Phillips 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.