Question 1

Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.

Accepted Answer

According to the sticky-wage theory, nom...

Question 2

An increase in the natural rate of unemployment shifts the short-run Phillips curve to the . If the central bank sees the increase in the unemployment rate, but thinks the natural rate has remained the same and so wants to reduce unemployment, it would the money supply growth rate. If it maintains this money supply growth rate, eventually the short run Phillips curve will shift and unemployment will be .

Accepted Answer

right, increase, rig...

Question 3

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

Question 4

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Accepted Answer

The unempl...

Question 5

In the late 1970s, proponents of rational expectations argued that

Accepted Answer

A)   the Fed should not attempt to aggressively fight inflation.
B)   the sacrifice ratio was smaller than previously thought.
C)   the short run was relatively long.
D)   None of the above is correct.E) All of the above
F) A) and B)

Question 6

In the late 1960's, Milton Friedman and Edmund Phelps argued that a tradeoff between inflation and unemployment

Accepted Answer

A)   existed in the long run and the short run.
B)   existed in the long run but not the short run.
C)   existed in the short run but not the long run.
D)   did not exist.E) None of the above
F) A) and B)

Question 7

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

A)   should not see an increase in the unemployment rate even in the short run.
B)   will having rising unemployment for a while, but then return to the natural rate of unemployment.
C)   will have a permanently higher unemployment rate.
D)   None of the above is suggested by the arguments of Friedman and Phelps.E) C) and D)
F) B) and D)

Question 8

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

Question 9

The short-run relationship between inflation and unemployment is often called

Accepted Answer

A)   the Classical Dichotomy.
B)   Money Neutrality.
C)   the Phillips curve.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 10

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie...

Question 11

If inflation is less than expected, then the unemployment rate is

Accepted Answer

A)   greater than the natural rate. In the long run the short-run Phillips curve will shift right.
B)   greater than the natural rate. In the long run the short-run Phillips curve will shift left.
C)   less than the natural rate. In the long run the short-run Phillips curve will shift right.
D)   less than the natural rate. In the long run the short-run Phillips curve will shift left.E) A) and D)
F) All of the above

Question 12

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Accepted Answer

The answer of A central bank disinflates. Output falls by...

Question 13

Which of the following shifts aggregate supply to the right?

Accepted Answer

A)   a decline in the price of imported natural resources
B)   a technological advance
C)   an older labor force that leaves jobs less frequently
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 14

If the unemployment rate is below the natural rate, then

Accepted Answer

A)   inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right.
B)   inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left.
C)   inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left.
D)   inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right.E) B) and C)
F) All of the above

Question 15

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A)   an increase in the natural rate of unemployment or expansionary monetary policy.
B)   expansionary monetary policy, but not an increase in the natural rate of unemployment.
C)   an increase in the natural rate of unemployment or a contractionary monetary policy.
D)   contractionary monetary policy, but not an increase in the natural rate of unemployment.E) A) and B)
F) A) and C)

Question 18

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) None of the above
F) A) and B)

Question 19

Suppose the Federal Reserve makes monetary policy more expansionary. 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) B) and D)
F) None of the above

Question 20

Friedman and Phelps believed that the natural rate of unemployment was constant.

Accepted Answer

A) True 
 B)False

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following shifts aggregate supply to the right?

Correct Answer
verified

Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.

Correct Answer
verified
According to the sticky-wage theory, nom...
View Answer

If the unemployment rate is below the natural rate, then

Correct Answer
verified

An increase in expected inflation shifts the

Correct Answer
verified

Friedman and Phelps believed that the natural rate of unemployment was constant.

Correct Answer
verified

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Correct Answer
verified

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Correct Answer
verified

The short-run relationship between inflation and unemployment is often called

Correct Answer
verified

In the late 1960's, Milton Friedman and Edmund Phelps argued that a tradeoff between inflation and unemployment

Correct Answer
verified

A movement to the right along a given short-run Phillips curve could be caused by

Correct Answer
verified

In the late 1970s, proponents of rational expectations argued that

Correct Answer
verified

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct Answer
verified
A downward-sloping Phillips curve implie...
View Answer

Correct Answer
verified
right, increase, rig...
View Answer

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Correct Answer
verified

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Correct Answer
verified

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

Correct Answer
verified

If inflation is less than expected, then the unemployment rate is

Correct Answer
verified

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Correct Answer
verified
The unempl...
View Answer

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate supply to the right?

Correct AnswerverifiedShow Answer

Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve.

Correct AnswerverifiedAccording to the sticky-wage theory, nom...View AnswerShow Answer

If the unemployment rate is below the natural rate, then

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts the

Correct AnswerverifiedShow Answer

Friedman and Phelps believed that the natural rate of unemployment was constant.

Correct AnswerverifiedShow Answer

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Correct AnswerverifiedShow Answer

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Correct AnswerverifiedShow Answer

The short-run relationship between inflation and unemployment is often called

Correct AnswerverifiedShow Answer

In the late 1960's, Milton Friedman and Edmund Phelps argued that a tradeoff between inflation and unemployment

Correct AnswerverifiedShow Answer

A movement to the right along a given short-run Phillips curve could be caused by

Correct AnswerverifiedShow Answer

In the late 1970s, proponents of rational expectations argued that

Correct AnswerverifiedShow Answer

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct AnswerverifiedA downward-sloping Phillips curve implie...View AnswerShow Answer

Correct Answerverifiedright, increase, rig...View AnswerShow Answer

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If inflation is less than expected, then the unemployment rate is

Correct AnswerverifiedShow Answer

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Correct AnswerverifiedThe unempl...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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According to the sticky-wage theory, nom...
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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
verified
A downward-sloping Phillips curve implie...
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Correct Answer
verified
right, increase, rig...
View 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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Correct Answer
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The unempl...
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