Question 1

Disinflation would eventually cause

Accepted Answer

A)   the short-run and the long run Phillips curve to shift right.
B)   the short-run and the long run Phillips curve to shift left.
C)   the short-run Phillips curve but not the long run Phillips curve to shift right.
D)   the short-run Phillips curve but not the long run Phillips curve to shift left.E) B) and C)
F) All of the above

Question 2

Friedman argued that the Fed could use monetary policy to peg

Accepted Answer

A)   the level of real GDP.
B)   the growth rate of real GDP.
C)   the rate of unemployment.
D)   None of the above is correct.E) B) and D)
F) A) and C)

Question 3

More flexible labor markets will shift

Accepted Answer

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

Question 4

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

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

Question 5

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is correct if there is a favorable supply shock?

Accepted Answer

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

Question 7

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Accepted Answer

A)   consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation.
B)   consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation.
C)   inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation.
D)   inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation.E) A) and D)
F) B) and C)

Question 8

Which of the following is correct according to the long-run Phillips curve?

Accepted Answer

A)   No government policy, including changes in monetary growth, can change the natural rate of unemployment.
B)   Changes in the money supply growth rate is the only government policy that can change the natural rate of unemployment.
C)   Monetary policy cannot change the natural rate of unemployment, but other government policies can.
D)   Monetary policy and other government policies can both change the natural rate of unemployment.E) All of the above
F) None of the above

Question 9

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Accepted Answer

Both reflect the classical dichotomy. Th...

Question 10

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Accepted Answer

A)   maintained a higher money supply growth rate.
B)   maintained a lower money supply growth rate.
C)   a higher minimum wage than country B.
D)   a lower minimum wage than country B.E) A) and D)
F) A) and C)

Question 11

Figure 17-3. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.
  
-Refer to Figure 17-3. What is measured along the vertical axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   the price level
D)   the change in output from one year to the nextE) None of the above
F) All of the above

Question 12

Contractionary monetary policy

Accepted Answer

A)   leads to disinflation and makes the short-run Phillips curve shift right.
B)   leads to disinflation and makes the short-run Phillips curve shift left.
C)   does not lead to disinflation but makes the short-run Phillips curve shift right.
D)   does not lead to disinflation but makes the short-run Phillips curve shift left.E) C) and D)
F) All of the above

Question 13

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 14

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

Question 15

An adverse supply shock will shift short-run aggregate supply

Accepted Answer

A)   right, making prices rise.
B)   left, making prices rise.
C)   right, making prices fall.
D)   left, making prices fall.E) C) and D)
F) B) and D)

Question 16

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Accepted Answer

A) True 
 B)False

Question 17

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Accepted Answer

A) True 
 B)False

Question 18

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Accepted Answer

A) True 
 B)False

Question 19

An increase in expected inflation shifts the

Accepted Answer

A)   short-run Phillips curve right.
B)   short-run Phillips curve left.
C)   long-run Phillips curve right.
D)   long-run Phillips curve left.E) C) and D)
F) None of the above

Question 20

If the government raises government expenditures, then in the short run prices

Accepted Answer

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

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

Contractionary monetary policy

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 argued that the Fed could use monetary policy to peg

Correct Answer
verified

Which of the following is correct if there is a favorable supply shock?

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, a decrease in money supply growth moves the economy to

Correct Answer
verified

Which of the following is correct according to the long-run Phillips curve?

Correct Answer
verified

Correct Answer
verified

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Correct Answer
verified

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Correct Answer
verified

An adverse supply shock will shift short-run aggregate supply

Correct Answer
verified

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Correct Answer
verified
Both reflect the classical dichotomy. Th...
View Answer

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Correct Answer
verified

More flexible labor markets will shift

Correct Answer
verified

If the government raises government expenditures, then in the short run prices

Correct Answer
verified

An increase in expected inflation shifts the

Correct Answer
verified

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Correct Answer
verified

According to the long-run Phillips curve, in the long run monetary policy influences

Correct Answer
verified

Disinflation would eventually cause

Correct Answer
verified

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

Correct Answer
verified

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Correct Answer
verified

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

Contractionary monetary policy

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 argued that the Fed could use monetary policy to peg

Correct AnswerverifiedShow Answer

Which of the following is correct if there is a favorable supply shock?

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, a decrease in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

Which of the following is correct according to the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Correct AnswerverifiedShow Answer

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Correct AnswerverifiedShow Answer

An adverse supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Correct AnswerverifiedBoth reflect the classical dichotomy. Th...View AnswerShow Answer

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Correct AnswerverifiedShow Answer

More flexible labor markets will shift

Correct AnswerverifiedShow Answer

If the government raises government expenditures, then in the short run prices

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts the

Correct AnswerverifiedShow Answer

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve, in the long run monetary policy influences

Correct AnswerverifiedShow Answer

Disinflation would eventually cause

Correct AnswerverifiedShow Answer

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

Correct AnswerverifiedShow Answer

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Correct AnswerverifiedShow Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
Both reflect the classical dichotomy. Th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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