Question 1

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Accepted Answer

In the long run the natural rate of unem...

Question 2

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) All of the above

Question 3

Figure 17-2
Use the pair of diagrams below to answer the following questions.
 
-Refer to Figure 17-2. If the economy starts at C and 1, then in the short run, a decrease in government expenditures moves the economy to

Accepted Answer

A)   D and 2
B)   D and 3.
C)   E and 3.
D)   None of the above is correct.E) A) and C)
F) None of the above

Question 4

Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run

Accepted Answer

A)   the natural rate of unemployment rises.
B)   the natural rate of unemployment falls.
C)   the unemployment rate will be above its natural rate.
D)   the unemployment rate will be below its natural rate.E) A) and B)
F) A) and C)

Question 5

Suppose that money supply growth increases. In the long run, this increases employment according to

Accepted Answer

A)   both the long-run Phillips curve and the aggregate demand and aggregate supply model.
B)   neither the long-run Phillips curve nor the aggregate demand and aggregate supply model.
C)   the long-run Phillips curve, but not the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model, but not the long-run Phillips curveE) None of the above
F) A) and D)

Question 6

If policymakers decrease aggregate demand, then in the long run

Accepted Answer

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

Question 7

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 B)
F) A) and C)

Question 8

Figure 17-6
Use the two graphs in the diagram to answer the following questions.
 
-Refer to Figure 17-6. Starting from C and 3, in the long run, an increase 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) B) and C)
F) A) and D)

Question 9

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) A) and B)
F) A) and C)

Question 10

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Accepted Answer

A) True 
 B)False

Question 11

Figure 17-6
Use the two graphs in the diagram to answer the following questions.
 
-Refer to Figure 17-6. The economy would move from 3 to 5

Accepted Answer

A)   in the short run if money supply growth increased unexpectedly.
B)   in the short run if money supply growth decreased unexpectedly.
C)   in the long run if money supply growth increases.
D)   in the long run if money supply growth decreases.E) A) and D)
F) All of the above

Question 12

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) A) and D)
F) A) and C)

Question 13

An adverse supply shock causes inflation to

Accepted Answer

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

Question 14

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) C) and D)
F) B) and D)

Question 15

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Accepted Answer

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

Question 16

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Accepted Answer

A)   falls, so there are upward pressures on wages and prices.
B)   falls, so there are downward pressures on wages and prices.
C)   rises, so there are upward pressures on wages and prices.
D)   rises, so there are downward pressures on wages and prices.E) None of the above
F) A) and D)

Question 17

The equation, Unemployment rate = Natural rate of unemployment - a ×	imes× ctual inflation - Expected inflation) ,

Accepted Answer

A)   is the equation of the short-run Phillips curve.
B)   implies there can be no stable short-run Phillips curve.
C)   reflects the reasoning of Friedman and Phelps.
D)   All of the above are correct. E) B) and C)
F) A) and C)

Question 18

Suppose that the money supply decreases. 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) B) and C)
F) C) and D)

Question 19

The short-run Phillips curve intersects the long-run Phillips curve where

Accepted Answer

A)   the actual rate of inflation equals the expected rate of inflation.
B)   the actual rate of unemployment equals the natural rate of unemployment.
C)   Both A and B are correct.
D)   None of the above is correct.E) None of the above
F) C) and D)

Question 20

Figure 17-1. 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 17-1. 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. Then it is apparent that the price index equaled

Accepted Answer

A)   130 in 2011.
B)   115 in 2011.
C)   110 in 2011.
D)   100 in 2011.E) None of the above
F) B) and C)

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run

Correct Answer
verified

Figure 17-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 17-6. The economy would move from 3 to 5

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

If policymakers decrease aggregate demand, then in the long run

Correct Answer
verified

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

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Correct Answer
verified
In the long run the natural rate of unem...
View Answer

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Correct Answer
verified

Suppose that money supply growth increases. In the long run, this increases employment according to

Correct Answer
verified

The short-run Phillips curve intersects the long-run Phillips curve where

Correct Answer
verified

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

Correct Answer
verified

Figure 17-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 17-6. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Correct Answer
verified

A favorable supply shock will cause

Correct Answer
verified

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Correct Answer
verified

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct Answer
verified

The equation, Unemployment rate = Natural rate of unemployment - a $\times$ ctual inflation - Expected inflation) ,

Correct Answer
verified

An adverse supply shock causes inflation to

Correct Answer
verified

Figure 17-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 17-2. If the economy starts at C and 1, then in the short run, a decrease in government expenditures moves the economy to

Correct Answer
verified

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run

Correct AnswerverifiedShow Answer

Figure 17-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 17-6. The economy would move from 3 to 5

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If policymakers decrease aggregate demand, then in the long run

Correct AnswerverifiedShow Answer

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

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Correct AnswerverifiedIn the long run the natural rate of unem...View AnswerShow Answer

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Correct AnswerverifiedShow Answer

Suppose that money supply growth increases. In the long run, this increases employment according to

Correct AnswerverifiedShow Answer

The short-run Phillips curve intersects the long-run Phillips curve where

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 17-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 17-6. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

A favorable supply shock will cause

Correct AnswerverifiedShow Answer

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Correct AnswerverifiedShow Answer

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct AnswerverifiedShow Answer

The equation, Unemployment rate = Natural rate of unemployment - a ×\times× ctual inflation - Expected inflation) ,

Correct AnswerverifiedShow Answer

An adverse supply shock causes inflation to

Correct AnswerverifiedShow Answer

Figure 17-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 17-2. If the economy starts at C and 1, then in the short run, a decrease in government expenditures moves the economy to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In the long run the natural rate of unem...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The equation, Unemployment rate = Natural rate of unemployment - a $\times$ ctual inflation - Expected inflation) ,

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified