Question 1

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 2

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Accepted Answer

It returns...

Question 3

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

Accepted Answer

As a move down along...

Question 4

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Accepted Answer

A) True 
 B)False

Question 5

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Accepted Answer

A) True 
 B)False

Question 6

Suppose Congress passes an investment tax credit that increases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

Accepted Answer

A)  In the short run, unemployment will increase and inflation will fall.
B)  ​In the short run, unemployment will increase and inflation will rise.
C)  ​In the short run, unemployment will decrease and inflation will rise.
D)  ​In the short run, unemployment will decrease and inflation will fall.E) A) and B)
F) B) and D)

Question 7

An adverse supply shock shifts the short-run Phillips curve to the left.

Accepted Answer

A) True 
 B)False

Question 8

A movement to the left along a given short-run Phillips curve could be caused by

Accepted Answer

A)  a reduction in the natural rate of unemployment or expansionary monetary policy.
B)  expansionary monetary policy, but not a reduction in the natural rate of unemployment.
C)  either a reduction in the natural rate of unemployment or a contractionary monetary policy.
D)  contractionary monetary policy, but not a reduction in the natural rate of unemployment.E) B) and C)
F) A) and C)

Question 9

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Accepted Answer

A)  both higher inflation and higher unemployment in the long run.
B)  higher inflation and no change in unemployment in the long run.
C)  the same inflation rate and lower unemployment in the long run.
D)  higher inflation and lower unemployment in the long runE) B) and D)
F) B) and C)

Question 10

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.E) A) and B)
F) B) and C)

Question 11

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Accepted Answer

A)  of accommodative monetary policy.
B)  of disinflation.
C)  that was designed to reduce the unemployment rate.
D)  that produced results that were clearly consistent with those predicted by rational-expectations theorists.E) B) and C)
F) A) and D)

Question 12

Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

Accepted Answer

A)  In the short run, unemployment will increase and inflation will fall.
B)  ​In the short run, unemployment will increase and inflation will rise.
C)  ​In the short run, unemployment will decrease and inflation will rise.
D)  ​In the short run, unemployment will decrease and inflation will fall.E) None of the above
F) B) and D)

Question 13

The long-run Phillips curve would shift to the left if

Accepted Answer

A)  the money supply growth rate increased or if effective job-training programs were implemented.
B)  the money supply growth rate increased, but not if effective job-training programs were implemented.
C)  effective job-training programs were implemented, but not if the money supply growth rate increased.
D)  None of the above is correct.E) C) and D)
F) A) and B)

Question 14

In the long run, which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage
B)  an increase in government spending
C)  an increase in the money supply
D)  a decrease in the money supplyE) A) and B)
F) A) and C)

Question 15

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. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left-hand graph. Also suppose we know that the price index equaled 120 in 2011. Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Accepted Answer

A)  155 and 175, respectively.
B)  138 and 156, respectively.
C)  137.5 and 154.75, respectively.
D)  135 and 150, respectively.E) B) and C)
F) B) and D)

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.E) B) and C)
F) B) and D)

Question 17

If policymakers increase aggregate demand, then in the short run the price level

Accepted Answer

A)  falls and unemployment rises.
B)  and unemployment fall.
C)  and unemployment rise.
D)  rises and unemployment falls.E) B) and C)
F) C) and D)

Question 18

The Volcker disinflation

Accepted Answer

A)  had virtually no impact on output, just as the classical dichotomy suggested.
B)  was associated with rising output, perhaps due to expansionary fiscal policy.
C)  caused output to fall, but by less than the typical estimate of the sacrifice ratio suggested.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 19

Disinflation is a reduction in

Accepted Answer

A)  the price level.
B)  the inflation rate.
C)  the consumer price index.
D)  All of the above are correct.E) A) and B)
F) B) and D)

Question 20

If the central bank increases the money supply, in the short run, the price level

Accepted Answer

A)  and unemployment rise.
B)  rises and unemployment falls.
C)  falls and unemployment rises.
D)  and unemployment fall.E) C) and D)
F) None of the above

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

A movement to the left along a given short-run Phillips curve could be caused by

Correct Answer
verified

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

Correct Answer
verified
As a move down along...
View Answer

If policymakers increase aggregate demand, then in the short run the price level

Correct Answer
verified

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Correct Answer
verified

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Correct Answer
verified

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Correct Answer
verified

Disinflation is a reduction in

Correct Answer
verified

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Correct Answer
verified
It returns...
View Answer

In the long run, policy that changes aggregate demand changes

Correct Answer
verified

If the central bank increases the money supply, in the short run, the price level

Correct Answer
verified

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct Answer
verified

Correct Answer
verified

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.

Correct Answer
verified
The price level and output ris...
View Answer

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

Correct Answer
verified

The long-run Phillips curve would shift to the left if

Correct Answer
verified

Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

Correct Answer
verified

The Volcker disinflation

Correct Answer
verified

Suppose Congress passes an investment tax credit that increases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

Correct Answer
verified

An adverse supply shock shifts the short-run Phillips curve to the left.

Correct Answer
verified

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct Answer
verified

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

A movement to the left along a given short-run Phillips curve could be caused by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAs a move down along...View AnswerShow Answer

If policymakers increase aggregate demand, then in the short run the price level

Correct AnswerverifiedShow Answer

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Correct AnswerverifiedShow Answer

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Correct AnswerverifiedShow Answer

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Correct AnswerverifiedShow Answer

Disinflation is a reduction in

Correct AnswerverifiedShow Answer

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Correct AnswerverifiedIt returns...View AnswerShow Answer

In the long run, policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

If the central bank increases the money supply, in the short run, the price level

Correct AnswerverifiedShow Answer

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedThe price level and output ris...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The long-run Phillips curve would shift to the left if

Correct AnswerverifiedShow Answer

Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

Correct AnswerverifiedShow Answer

The Volcker disinflation

Correct AnswerverifiedShow Answer

Suppose Congress passes an investment tax credit that increases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve to the left.

Correct AnswerverifiedShow Answer

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct AnswerverifiedShow Answer

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Correct Answer
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As a move down along...
View Answer

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It returns...
View Answer

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The price level and output ris...
View Answer

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