Question 1

If inflationary expectations are quite sluggish (that is, they do not adapt quickly), then the short-run Phillips curve will

Accepted Answer

A)  be vertical. 
B)  be horizontal. 
C)  slope downward. 
D)  slope upward.

Question 2

If the short-run Phillips curve has a very steep slope, the

Accepted Answer

A)  structural deficit will grow during inflation. 
B)  structural deficit will fall during recession. 
C)  inflation costs of reducing unemployment are relatively low. 
D)  inflation costs of reducing unemployment are relatively high.

Question 3

In the short run, fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

Accepted Answer

A)  the Fed and Congress rarely agree on policy. 
B)  one controls aggregate demand, the other controls aggregate supply. 
C)  both policies control only aggregate supply. 
D)  both policies control only aggregate demand.

Question 4

Figure 33-5

The data illustrated in Figure 33-5 would be most representative of which of the following decades?

Accepted Answer

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

Question 5

Policies to lower the natural rate of unemployment include

Accepted Answer

A)  proposals to raise the minimum wage rate. 
B)  mandated prison sentences for drug dealers. 
C)  retraining programs and employment services. 
D)  changes in the tax laws.

Question 6

Inflation targeting requires monetary policymakers to rely heavily on the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 7

Figure 33-7

In Figure 33-7, the case for restrictive monetary and fiscal policy is strongest at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 8

If strong monetary policy stimulus is used to combat a recessionary gap, what will happen?

Accepted Answer

A)  A rapid movement toward lower unemployment and higher inflation 
B)  A rapid movement toward lower unemployment and lower inflation 
C)  A slow movement toward lower unemployment and higher inflation 
D)  A slow movement toward lower unemployment and lower inflation

Question 9

In 2008-2010, American policymakers decided to risk

Accepted Answer

A)  higher inflation for the sake of decreasing unemployment. 
B)  higher unemployment to hold down inflation. 
C)  increasing taxes for the sake of reducing the budget deficit. 
D)  reducing government spending for the sake of balancing the budget.

Question 10

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be vertical. 
D)  be horizontal.

Question 11

Figure 33-1

Which of the following is true about the economy depicted in Figure 33-1?

Accepted Answer

A)  Economy is experiencing supply-side inflation. 
B)  Policymakers have chosen to fight inflation rather than unemployment. 
C)  The increase in aggregate demand has increased prices but not real GDP. 
D)  The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.

Question 12

The unemployment rate for the U.S. economy in 2014 averaged about

Accepted Answer

A)  10.2 percent. 
B)  8.5 percent. 
C)  6.5 percent. 
D)  4 percent.

Question 13

If expectations are rational,

Accepted Answer

A)  a predictable change in inflation can make the expected inflation rate deviate from the actual rate. 
B)  unemployment can exceed the full-employment rate even in the long run. 
C)  the difference between the actual inflation rate and the expected inflation rate must be a purely random number. 
D)  the inflation rate cannot be reduced without a period of high unemployment because the Phillips curve is downward sloping.

Question 14

If aggregate demand grows faster than aggregate supply, the equilibrium price level will rise.

Accepted Answer

A) True 
 B)False

Question 15

When inflation comes from the supply side, inflation and unemployment are positively correlated. Does this mean that monetary and fiscal policymakers can escape the trade-off between inflation and unemployment?

Accepted Answer

The answer of When inflation comes from the supply side,...

Question 16

What are some of the possible ways in which we could reduce the natural rate of unemployment?

Accepted Answer

The answer of What are some of the possible ways...

Question 17

If, in the long run, people adjust their price expectation so that all prices and incomes move proportionately to an increase in the price level, then the long-run Phillips curve is vertical.

Accepted Answer

A) True 
 B)False

Question 18

The rapid advance in computer technology is one of the reasons given for the shift of the

Accepted Answer

A)  aggregate demand curve outward. 
B)  aggregate supply curve inward. 
C)  aggregate supply curve outward. 
D)  total expenditures curve upward.

Question 19

If fluctuations in economic activity emanate from the supply side, higher rates of inflation will be associated with higher rates of unemployment, and lower rates of inflation will be associated with lower rates of unemployment.

Accepted Answer

A) True 
 B)False

Question 20

Stimulating aggregate demand to reduce unemployment will aggravate inflation.

Accepted Answer

A) True 
 B)False

Exam 33: The Trade-Off Between Inflation and Unemployment

If inflationary expectations are quite sluggish (that is, they do not adapt quickly) , then the short-run Phillips curve will

If the short-run Phillips curve has a very steep slope, the

In the short run, fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

Figure 33-5 The data illustrated in Figure 33-5 would be most representative of which of the following decades?

Policies to lower the natural rate of unemployment include

Inflation targeting requires monetary policymakers to rely heavily on the Phillips curve.

Figure 33-7 In Figure 33-7, the case for restrictive monetary and fiscal policy is strongest at point

If strong monetary policy stimulus is used to combat a recessionary gap, what will happen?

In 2008-2010, American policymakers decided to risk

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

Figure 33-1 Which of the following is true about the economy depicted in Figure 33-1?

The unemployment rate for the U.S. economy in 2014 averaged about

If expectations are rational,

If aggregate demand grows faster than aggregate supply, the equilibrium price level will rise.

When inflation comes from the supply side, inflation and unemployment are positively correlated. Does this mean that monetary and fiscal policymakers can escape the trade-off between inflation and unemployment?

What are some of the possible ways in which we could reduce the natural rate of unemployment?

If, in the long run, people adjust their price expectation so that all prices and incomes move proportionately to an increase in the price level, then the long-run Phillips curve is vertical.

The rapid advance in computer technology is one of the reasons given for the shift of the

If fluctuations in economic activity emanate from the supply side, higher rates of inflation will be associated with higher rates of unemployment, and lower rates of inflation will be associated with lower rates of unemployment.

Stimulating aggregate demand to reduce unemployment will aggravate inflation.