Question 1

A favorable supply shock will cause

Accepted Answer

A)   unemployment to rise and the short-run Phillips curve to shift right.
B)   unemployment to rise and the short-run Phillips curve to shift left.
C)   unemployment to fall and the short-run Phillips curve to shift right.
D)   unemployment to fall and the short-run Phillips curve to shift left.E) C) and D)
F) B) and C)

Question 2

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

Question 3

Figure 35-6
Use this graph to answer the questions below. 
-Refer to figure 35-6.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.E) A) and B)
F) A) and D)

Question 4

The short-run Phillips curve shows the combinations of

Accepted Answer

A)   unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve.
B)   unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
C)   real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 5

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)   the unemployment rate will be below its natural rate whenever inflation is negative.
B)   the unemployment rate will be below its natural rate whenever inflation is positive.
C)   the unemployment rate will be below its natural rate only if inflation is less than expected.
D)   the unemployment rate will be below its natural rate only if inflation is greater than expected.E) A) and B)
F) A) and C)

Question 6

Figure 35-5
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

Accepted Answer

A)   A and 1.
B)   back to C and 3.
C)   D and 4.
D)   F and 5.E) None of the above
F) B) and C)

Question 7

The natural rate of unemployment

Accepted Answer

A)   is constant over time.
B)   varies over time,but can't be changed by the government.
C)   is the socially desirable rate of unemployment.
D)   does not depend on the rate at which the Fed increases the money supply.E) B) and D)
F) B) and C)

Question 8

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 9

Figure 35-6
Use this graph to answer the questions below. 
-Refer to figure 35-6.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A)   7% unemployment and 1% inflation
B)   7% unemployment and 3% inflation
C)   3% unemployment and 5% inflation
D)   3% unemployment and 7% inflationE) B) and D)
F) A) and D)

Question 10

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 11

Figure 35-4
Use the graph below to answer the following questions. 
-Refer to Figure 35-4.Curve 2 is the

Accepted Answer

A)   long-run Phillips curve.
B)   short-run Phillips curve.
C)   long-run aggregate demand curve.
D)   short-run aggregate demand curve.E) A) and C)
F) B) and C)

Question 12

In his famous article published in an economics journal in 1958,A.W.Phillips

Accepted Answer

A)   used data for the United States to show a negative relationship between the rate of change of the U.S.consumer price index and the U.S.unemployment rate.
B)   used data for the United States to show a negative relationship between the rate of change of wages in the U.S.and the U.S.unemployment rate.
C)   used data for the United Kingdom to show a negative relationship between the rate of change of the U.K.consumer price index and the U.K.unemployment rate.
D)   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.E) B) and D)
F) B) and C)

Question 13

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)   reduced both unemployment and inflation.
B)   reduced inflation significantly,but at the cost of a severe recession.
C)   reduced unemployment significantly,but at the cost of higher inflation.
D)   raised both unemployment and inflation.E) A) and D)
F) B) and D)

Question 14

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 the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model but not the short-run Phillips curve.E) C) and D)
F) B) and C)

Question 15

The large increase in oil prices in the 1970s was caused primarily by a(n)

Accepted Answer

A)   increase in demand for oil.
B)   decrease in demand for oil.
C)   decrease in the supply of oil.
D)   increase in the supply of oil.E) C) and D)
F) B) and D)

Question 16

From 1993-2001 the U.S.economy experienced

Accepted Answer

A)   relatively low inflation and unemployment rates.
B)   relatively high inflation and unemployment rates.
C)   relatively low inflation rates and relatively high unemployment rates.
D)   relatively high inflation rates and relatively low unemployment rates.E) A) and B)
F) A) and C)

Question 17

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 18

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.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) B) and C)
F) All of the above

Question 19

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

Accepted Answer

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

Question 20

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

Accepted Answer

A)   the inflation rate and the natural rate of unemployment.
B)   the inflation rate,but not the natural rate of unemployment.
C)   neither the inflation rate nor the natural rate of unemployment.
D)   the natural rate of unemployment,but not the inflation rate.E) B) and C)
F) A) and D)

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Correct Answer
verified

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.Curve 2 is the

Correct Answer
verified

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

Correct Answer
verified

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct Answer
verified

A favorable supply shock will cause

Correct Answer
verified

Figure 35-5 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

Correct Answer
verified

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

Correct Answer
verified

The large increase in oil prices in the 1970s was caused primarily by a(n)

Correct Answer
verified

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Correct Answer
verified

Figure 35-6 Use this graph to answer the questions below. -Refer to figure 35-6.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

Correct Answer
verified

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of the housing and financial crisis are shown by

Correct Answer
verified

According to Friedman and Phelps's analysis of the Phillips curve,

Correct Answer
verified

Moving from the late 1960s to 1970-1973

Correct Answer
verified

The short-run Phillips curve shows the combinations of

Correct Answer
verified

From 1993-2001 the U.S.economy experienced

Correct Answer
verified

Correct Answer
verified

The natural rate of unemployment

Correct Answer
verified

In his famous article published in an economics journal in 1958,A.W.Phillips

Correct Answer
verified

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

Correct Answer
verified

The restrictive monetary policy followed by the Fed in the early 1980s

Correct Answer
verified

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Correct AnswerverifiedShow Answer

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.Curve 2 is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct AnswerverifiedShow Answer

A favorable supply shock will cause

Correct AnswerverifiedShow Answer

Figure 35-5 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The large increase in oil prices in the 1970s was caused primarily by a(n)

Correct AnswerverifiedShow Answer

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Correct AnswerverifiedShow Answer

Figure 35-6 Use this graph to answer the questions below. -Refer to figure 35-6.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

Correct AnswerverifiedShow Answer

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of the housing and financial crisis are shown by

Correct AnswerverifiedShow Answer

According to Friedman and Phelps's analysis of the Phillips curve,

Correct AnswerverifiedShow Answer

Moving from the late 1960s to 1970-1973

Correct AnswerverifiedShow Answer

The short-run Phillips curve shows the combinations of

Correct AnswerverifiedShow Answer

From 1993-2001 the U.S.economy experienced

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The natural rate of unemployment

Correct AnswerverifiedShow Answer

In his famous article published in an economics journal in 1958,A.W.Phillips

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The restrictive monetary policy followed by the Fed in the early 1980s

Correct AnswerverifiedShow Answer

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