Question 1

In the long run,if the Fed decreases the rate at which it increases the money supply,

Accepted Answer

A)   inflation and unemployment will be higher.
B)   inflation will be higher and unemployment will be lower.
C)   inflation will be lower and unemployment will be higher.
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 2

In 1979,Fed chair Paul Volcker decided to pursue a policy

Accepted Answer

A)   that would lead to disinflation.
B)   that would create falling prices.
C)   to accommodate continuing adverse supply shocks.
D)   that maintained money growth at its current level.E) A) and D)
F) C) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

In the long run,a decrease in the money supply growth rate

Accepted Answer

A)   reduces expected inflation so the long-run Phillips curve shifts left.
B)   reduces expected inflation so the short-run Phillips curve shifts left.
C)   Both A and B are correct.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 5

A favorable supply shock will shift short-run aggregate supply

Accepted Answer

A)   left,making output rise.
B)   left,making output fall.
C)   right,making output rise.
D)   right,making output fall.E) None of the above
F) B) and C)

Question 6

Friedman and Phelps argued

Accepted Answer

A)   that in the long run,monetary growth did not influence those factors that determine the economy's unemployment rate.
B)   that the Phillips curve could be exploited in the long run by using monetary,but not fiscal policy.
C)   that the short-run Phillips curve was very steep,but not vertical.
D)   that there was neither a short-run nor long-run tradeoff between inflation and unemployment.E) A) and D)
F) B) and D)

Question 7

A.W.Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Accepted Answer

A)   could not be extended to other countries,despite many researchers' attempts to provide that extension.
B)   was quickly extended to other countries by researchers.
C)   was extended to only one other country - the United States.
D)   was harshly criticized by the American economists Paul Samuelson and Robert Solow on the grounds that Phillips's study was fundamentally flawed.E) A) and D)
F) A) and C)

Question 8

Suppose the Federal Reserve pursues contractionary monetary policy.In the long run

Accepted Answer

A)   both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)   inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)   inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)   inflation is lower and unemployment is the same as it was prior to the change in policy.E) A) and D)
F) A) and B)

Question 9

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

Accepted Answer

A)   increases inflation and shifts the short-run Phillips curve right.
B)   increases inflation and shifts the short-run Phillips curve left.
C)   decreases inflation and shifts the short-run Philips curve right.
D)   decreases inflation and shifts the short-run Phillips curve left.E) B) and C)
F) A) and D)

Question 10

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.What is measured along the vertical axis of the right-hand graph?

Accepted Answer

A)   the interest rate
B)   the inflation rate
C)   the wage rate
D)   the growth rate of the nominal money supplyE) None of the above
F) All of the above

Question 11

Suppose expected inflation and actual inflation are both low,and unemployment is at its natural rate.If the Fed then pursues an expansionary monetary policy,which of the following results would be expected in the short run?

Accepted Answer

A)   The short-run Phillips curve would shift to the left.
B)   The short-run Phillips curve would shift to the right.
C)   The economy would move up and to the left along a given short-run Phillips curve.
D)   The economy would move down and to the right along a given short-run Phillips curve.E) A) and B)
F) A) and C)

Question 12

According to classical macroeconomic theory,in the long run

Accepted Answer

A)   monetary growth affects both real and nominal variables.
B)   the only real variable affected by monetary growth is the unemployment rate.
C)   a number of factors that affect unemployment are influenced by monetary growth.
D)   monetary growth affects nominal but not real variables.E) B) and D)
F) A) and B)

Question 13

A central bank that accommodates an aggregate supply shock

Accepted Answer

A)   increases the money supply,making the inflation rate rise.
B)   increases the money supply,making the inflation rate fall.
C)   decreases the money supply,making the inflation rate rise.
D)   decreases the money supply,making the inflation rate fall.E) A) and B)
F) None of the above

Question 14

If there is an adverse supply shock,then

Accepted Answer

A)   unemployment rises and the short-run Phillips curve shifts right.
B)   unemployment rises and the short-run Phillips curve shifts left.
C)   unemployment falls and the short-run Phillips curve shifts right.
D)   unemployment falls and the short-run Phillips curve shifts left.E) All of the above
F) B) and D)

Question 15

If policymakers expand aggregate demand,then in the long run

Accepted Answer

A)   prices will be higher and unemployment will be lower.
B)   prices will be higher and unemployment will be unchanged.
C)   prices and unemployment will be unchanged.
D)   None of the above is correct.E) A) and B)
F) A) and D)

Question 16

a In the nineteenth century,some countries were on a gold standard so that on average the money supply growth rate was close to zero and expected inflation was more or less constant.For these countries during this time period,we find that increases in actual inflation were generally associated with falling unemployment.These findings

Accepted Answer

A)   are consistent with Friedman and Phelps' theories,because they argued that when inflation was higher than expected,unemployment would fall.
B)   are consistent with Friedman and Phelps' theories,because they argued that when prices rose unemployment would fall whether actual inflation was higher than expected or not.
C)   are inconsistent with Friedman and Phelps' theories,because they argued that higher inflation would increase unemployment.
D)   are inconsistent with Friedman and Phelps' theories,because they argued that inflation and unemployment are unrelated.E) A) and B)
F) None of the above

Question 17

Suppose that the Fed unexpectedly pursues contractionary monetary policy.What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Accepted Answer

In the short run,unemployment will rise,...

Question 18

Some countries have had relatively high inflation and relatively high unemployment for long periods of time.Is this consistent with the Phillips curve? Defend your answer.

Accepted Answer

They are consistent with the long-run Ph...

Question 19

A decrease in government expenditures serves as an example of an adverse supply shock.

Accepted Answer

A) True 
 B)False

Question 20

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level.Suppose that the public was very skeptical and in fact thought the Southland Department of Finance was going to raise inflation to 30% so it could increase its expenditures.Then

Accepted Answer

A)   unemployment falls,but it would have fallen less if people had been expecting 25% inflation.
B)   unemployment falls,but it would have fallen less if people had been expecting 35% inflation.
C)   unemployment rises,but it would have risen less if people had been expecting 25% inflation.
D)   unemployment rises,but it would have risen less if people had been expecting 35% inflation.E) C) and D)
F) All of the above

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

If there is an adverse supply shock,then

Correct Answer
verified

In the long run,if the Fed decreases the rate at which it increases the money supply,

Correct Answer
verified

If policymakers expand aggregate demand,then in the long run

Correct Answer
verified

A central bank that accommodates an aggregate supply shock

Correct Answer
verified

A.W.Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Some countries have had relatively high inflation and relatively high unemployment for long periods of time.Is this consistent with the Phillips curve? Defend your answer.

Correct Answer
verified
They are consistent with the long-run Ph...
View Answer

Friedman and Phelps argued

Correct Answer
verified

A decrease in government expenditures serves as an example of an adverse supply shock.

Correct Answer
verified

In the long run,a decrease in the money supply growth rate

Correct Answer
verified

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.What is measured along the vertical axis of the right-hand graph?

Correct Answer
verified

Suppose expected inflation and actual inflation are both low,and unemployment is at its natural rate.If the Fed then pursues an expansionary monetary policy,which of the following results would be expected in the short run?

Correct Answer
verified

Suppose the Federal Reserve pursues contractionary monetary policy.In the long run

Correct Answer
verified

Correct Answer
verified

According to classical macroeconomic theory,in the long run

Correct Answer
verified

A favorable supply shock will shift short-run aggregate supply

Correct Answer
verified

Correct Answer
verified

In 1979,Fed chair Paul Volcker decided to pursue a policy

Correct Answer
verified

Suppose that the Fed unexpectedly pursues contractionary monetary policy.What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct Answer
verified
In the short run,unemployment will rise,...
View Answer

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

If there is an adverse supply shock,then

Correct AnswerverifiedShow Answer

In the long run,if the Fed decreases the rate at which it increases the money supply,

Correct AnswerverifiedShow Answer

If policymakers expand aggregate demand,then in the long run

Correct AnswerverifiedShow Answer

A central bank that accommodates an aggregate supply shock

Correct AnswerverifiedShow Answer

A.W.Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Some countries have had relatively high inflation and relatively high unemployment for long periods of time.Is this consistent with the Phillips curve? Defend your answer.

Correct AnswerverifiedThey are consistent with the long-run Ph...View AnswerShow Answer

Friedman and Phelps argued

Correct AnswerverifiedShow Answer

A decrease in government expenditures serves as an example of an adverse supply shock.

Correct AnswerverifiedShow Answer

In the long run,a decrease in the money supply growth rate

Correct AnswerverifiedShow Answer

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.What is measured along the vertical axis of the right-hand graph?

Correct AnswerverifiedShow Answer

Suppose expected inflation and actual inflation are both low,and unemployment is at its natural rate.If the Fed then pursues an expansionary monetary policy,which of the following results would be expected in the short run?

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve pursues contractionary monetary policy.In the long run

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory,in the long run

Correct AnswerverifiedShow Answer

A favorable supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 1979,Fed chair Paul Volcker decided to pursue a policy

Correct AnswerverifiedShow Answer

Suppose that the Fed unexpectedly pursues contractionary monetary policy.What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct AnswerverifiedIn the short run,unemployment will rise,...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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They are consistent with the long-run Ph...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In the short run,unemployment will rise,...
View Answer