Question 1

What is meant by the natural rate of unemployment?

Accepted Answer

It is the rate of un...

Question 2

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Accepted Answer

A)  It would shift the long-run Phillips curve right.
B)  It would shift the long-run Phillips curve left.
C)  There would be an upward movement along a given long-run Phillips curve.
D)  There would be a downward movement along a given long-run Philips curve.E) C) and D)
F) A) and B)

Question 3

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Accepted Answer

Inflation rises and unemployment falls. ...

Question 4

Disinflation is defined as a

Accepted Answer

A)  zero rate of inflation.
B)  constant rate of inflation.
C)  reduction in the rate of inflation.
D)  negative rate of inflation.E) A) and B)
F) A) and C)

Question 5

​If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Accepted Answer

A)  low, so there was upward pressure on wages and prices.
B)  low, so there was downward pressure on wages and prices.
C)  high, so there was upward pressure on wages and prices.
D)  high, so there was downward pressure on wages and prices.E) None of the above
F) A) and B)

Question 8

Scenario 35-1
Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to Scenario 35-1. The short-run effects of rising world commodity prices are shown by

Accepted Answer

A)  moving to the right along the short-run Phillips curve.
B)  moving to the left along the short-run Phillips curve.
C)  shifting the short-run Phillips curve right.
D)  shifting the short-run Phillips curve left.E) None of the above
F) All of the above

Question 9

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Accepted Answer

A decrease in the growth rate of the mon...

Question 10

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 11

Scenario 35-2
​
In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.
-Refer to Scenario 35-2. Suppose that the Flosserland Department of Finance undertakes a public relations campaign to convince people that it will soon change monetary policy to reduce inflation to 12.5%. If Flosserlanders believe their government then which, if any, curve(s)  shift left?

Accepted Answer

A)  The short-run and the long-run Phillips curve
B)  The short-run but not the long-run Phillips curve
C)  The long-run but not the short-run Phillips curve
D)  Neither the short-run nor the long-run Phillips curveE) All of the above
F) C) and D)

Question 12

Scenario 35-1
Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to Scenario 35-1. The short-run effects of the housing and financial crisis are shown by

Accepted Answer

A)  moving to the right along the short-run Phillips curve.
B)  moving to the left along the short-run Phillips curve.
C)  shifting the short-run Phillips curve right.
D)  shifting the short-run Phillips curve left.E) C) and D)
F) A) and D)

Question 13

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Accepted Answer

Both the long-run and the shor...

Question 14

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally poor conditions for growing crops. The poor weather would

Accepted Answer

A)  shift both the short-run aggregate supply and the short-run Phillips curve left.
B)  shift both the short-run aggregate supply and the short-run Phillips curve right.
C)  shift the short-run aggregate supply curve to the left and the short-run Phillips curve to the right.
D)  shift the short-run aggregate supply curve to the right and the short-run Phillips curve to the left.E) A) and D)
F) All of the above

Question 15

Figure 35-1   ​
​
​
​
​
-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.E) A) and B)
F) A) and C)

Question 16

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 17

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) B) and D)
F) All of the above

Question 18

Assume the analysis of Friedman and Phelps is correct, so that the following equation is valid: ​
Unemployment rate = Natural rate of unemployment − a × (Αctual inflation − x) .
​
In this equation,

Accepted Answer

A)  a is a parameter that measures how much actual inflation responds to expected inflation.
B)  a = 0 at the point of intersection of the short-run and long-run Phillips curves.
C)  x is the expected rate of inflation.
D)  x = 0 when the actual rate of inflation equals the expected rate of inflation.E) A) and B)
F) None of the above

Question 19

Scenario 35-1
Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to Scenario 35-1. The effects of the housing and financial crises could be shown by shifting

Accepted Answer

A)  aggregate demand to the right.
B)  aggregate demand to the left.
C)  aggregate supply to the right.
D)  aggregate supply to the left.E) All of the above
F) A) and B)

Question 20

Suppose that the money supply increases. In the short run, this increases prices according to

Accepted Answer

A)  both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B)  neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C)  the short-run Phillips curve, but not according to the aggregate demand and aggregate supply model.
D)  the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.E) A) and D)
F) A) and B)

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

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. The effects of the housing and financial crises could be shown by shifting

Correct Answer
verified

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Correct Answer
verified

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct Answer
verified
Inflation rises and unemployment falls. ...
View Answer

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. The short-run effects of the housing and financial crisis are shown by

Correct Answer
verified

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct Answer
verified

Disinflation is defined as a

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

Assume the analysis of Friedman and Phelps is correct, so that the following equation is valid: Unemployment rate = Natural rate of unemployment − a × (Αctual inflation − x) . In this equation,

Correct Answer
verified

Suppose that the money supply increases. In the short run, this increases prices according to

Correct Answer
verified

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

Correct Answer
verified

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Correct Answer
verified

If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Correct Answer
verified

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally poor conditions for growing crops. The poor weather would

Correct Answer
verified

Correct Answer
verified

What is meant by the natural rate of unemployment?

Correct Answer
verified
It is the rate of un...
View Answer

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?

Correct Answer
verified
The short-run Phillips curve s...
View Answer

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. The short-run effects of rising world commodity prices are shown by

Correct Answer
verified

Figure 35-1 -Refer to Figure 35-1. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Correct Answer
verified

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Correct Answer
verified
Both the long-run and the shor...
View Answer

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Correct Answer
verified
A decrease in the growth rate of the mon...
View Answer

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

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. The effects of the housing and financial crises could be shown by shifting

Correct AnswerverifiedShow Answer

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Correct AnswerverifiedShow Answer

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct AnswerverifiedInflation rises and unemployment falls. ...View AnswerShow Answer

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. The short-run effects of the housing and financial crisis are shown by

Correct AnswerverifiedShow Answer

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Disinflation is defined as a

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

Assume the analysis of Friedman and Phelps is correct, so that the following equation is valid: ​ Unemployment rate = Natural rate of unemployment − a × (Αctual inflation − x) . ​ In this equation,

Correct AnswerverifiedShow Answer

Suppose that the money supply increases. In the short run, this increases prices according to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Correct AnswerverifiedShow Answer

​If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Correct AnswerverifiedShow Answer

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally poor conditions for growing crops. The poor weather would

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is meant by the natural rate of unemployment?

Correct AnswerverifiedIt is the rate of un...View AnswerShow Answer

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?

Correct AnswerverifiedThe short-run Phillips curve s...View AnswerShow Answer

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. The short-run effects of rising world commodity prices are shown by

Correct AnswerverifiedShow Answer

Figure 35-1 ​ ​ ​ ​ ​ -Refer to Figure 35-1. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Correct AnswerverifiedShow Answer

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Correct AnswerverifiedBoth the long-run and the shor...View AnswerShow Answer

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Correct AnswerverifiedA decrease in the growth rate of the mon...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Inflation rises and unemployment falls. ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Assume the analysis of Friedman and Phelps is correct, so that the following equation is valid: Unemployment rate = Natural rate of unemployment − a × (Αctual inflation − x) . In this equation,

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It is the rate of un...
View Answer

Correct Answer
verified
The short-run Phillips curve s...
View Answer

Correct Answer
verified

Figure 35-1 -Refer to Figure 35-1. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Correct Answer
verified

Correct Answer
verified
Both the long-run and the shor...
View Answer

Correct Answer
verified
A decrease in the growth rate of the mon...
View Answer