Question 1

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. The curve that is depicted on the right­hand graph offers policymakers a "menu" of combinations

Accepted Answer

A)   that applies both in the short run and in the long run.
B)   that is relevant to choices involving fiscal policy, but not to choices involving monetary policy.
C)   of inflation and unemployment.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 2

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Accepted Answer

A decrease in the growth rate of the mon...

Question 3

Some countries have inflation around or in excess of 8 percent. Suppose that the sacrifice ratio is 2.5. What is the cost of reducing inflation from 8 percent to 2 percent? In your answer, define the sacrifice ratio and explain how you found the cost of inflation reduction.

Accepted Answer

The sacrifice ratio gives the annual per...

Question 4

If the Fed wants to reverse the effects of an adverse supply shock on unemployment, it should

Accepted Answer

A)   increase the money supply growth rate which raises the inflation rate.
B)   increase the money supply growth rate which reduces the inflation rate.
C)   decrease the money supply growth rate which raises the inflation rate.
D)   decrease the money supply growth rate which reduces the inflation rate.E) All of the above
F) C) and D)

Question 5

According to the Phillips curve, policymakers can reduce inflation by

Accepted Answer

A)   contracting aggregate demand. This contraction results in a temporarily higher unemployment rate.
B)   contracting aggregate demand. This contraction results in a temporarily lower unemployment rate.
C)   expanding aggregate demand. This expansion results in a temporarily lower unemployment rate.
D)   expanding aggregate demand. This expansion results in a temporarily higher unemployment rate.E) All of the above
F) None of the above

Question 6

According to the Philips curve diagram, if a central bank takes action to reduce the inflation rate, unemployment is

Accepted Answer

A)   higher in the short-run and the long-run.
B)   higher in the short-run only.
C)   lower in the short-run and the long-run.
D)   lower in the short-run only.E) A) and D)
F) None of the above

Question 7

Figure 35-4. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis.  
-Refer to Figure 35-4. What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   output
D)   the interest rateE) A) and D)
F) A) and C)

Question 8

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8. 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 C)
F) None of the above

Question 9

In the 1970s, the Fed accommodated an)

Accepted Answer

A)   adverse supply shock and so contributed to higher inflation.
B)   adverse supply shock and so contributed to lower inflation.
C)   favorable supply shock and so contributed to higher inflation.
D)   favorable supply shock and so contributed to lower inflation.E) A) and D)
F) None of the above

Question 10

If people anticipate higher inflation, but inflation remains the same then

Accepted Answer

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

Question 11

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

Accepted Answer

A)   shifts the short-run Phillips curve left so inflation returns to its original rate.
B)   shifts the short-run Phillips curve left so unemployment returns to its natural rate.
C)   Both A and B are correct.
D)   None of the above is correct.E) All of the above
F) C) and D)

Question 12

If a central bank decreases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Accepted Answer

A)   both the price level and output
B)   the price level but not output
C)   output but not the price level
D)   neither output nor the price levelE) B) and D)
F) B) and C)

Question 13

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

Question 14

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Accepted Answer

A)   have higher average inflation rates than the United States.
B)   have long­run Phillips curves to the right of the United States'.
C)   may have less generous unemployment compensation or lower minimum wages.
D)   All of the above are consistent with the evidence on unemployment rates.E) B) and C)
F) A) and C)

Question 15

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following leads to a lower level of unemployment in the long run?

Accepted Answer

A)   both an increase in the size of the money supply and an increase in the money supply growth rate
B)   an increase in the size of the money supply but not an increase in the money supply growth rate
C)   an increase in the money supply growth rate, but not an increase in the size of the money supply
D)   neither an increase in the size of the money supply nor an increase in the money supply growth rateE) All of the above
F) A) and B)

Question 17

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A)   increase the rate at which the money supply increases. This will also move inflation closer to its previous rate..
B)   increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate
C)   decrease the rate at which the money supply increases. This will also move inflation closer to its original rate
D)   decrease the rate at which the money supply increases. However, this will make higher than its previous rate.E) C) and D)
F) B) and C)

Question 18

Samuelson and Solow argued that when unemployment is high, there is

Accepted Answer

A)   upward pressure on wages and prices.
B)   upward pressure on wages and downward pressure on prices.
C)   upward pressure on prices and downward pressure on wages.
D)   downward pressure on wages and prices.E) B) and C)
F) A) and D)

Question 19

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Accepted Answer

A)   is completely correct.
B)   is completely wrong.
C)   is true for the short run but not the long run.
D)   is true for the long run but not the short run .E) All of the above
F) A) and D)

Question 20

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) None of the above

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

Which of the following leads to a lower level of unemployment in the long run?

Correct Answer
verified

If the Fed wants to reverse the effects of an adverse supply shock on unemployment, it should

Correct Answer
verified

In the 1970s, the Fed accommodated an)

Correct Answer
verified

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

Correct Answer
verified

If people anticipate higher inflation, but inflation remains the same then

Correct Answer
verified

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Correct Answer
verified
A decrease in the growth rate of the mon...
View Answer

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

Correct Answer
verified

Some countries have inflation around or in excess of 8 percent. Suppose that the sacrifice ratio is 2.5. What is the cost of reducing inflation from 8 percent to 2 percent? In your answer, define the sacrifice ratio and explain how you found the cost of inflation reduction.

Correct Answer
verified
The sacrifice ratio gives the annual per...
View Answer

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

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. The curve that is depicted on the righthand graph offers policymakers a "menu" of combinations

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Samuelson and Solow argued that when unemployment is high, there is

Correct Answer
verified

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Correct Answer
verified

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Correct Answer
verified

According to the Phillips curve, policymakers can reduce inflation by

Correct Answer
verified

According to the Philips curve diagram, if a central bank takes action to reduce the inflation rate, unemployment is

Correct Answer
verified

If a central bank decreases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Correct Answer
verified

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct Answer
verified

If there is an adverse supply shock, then

Correct Answer
verified

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

Which of the following leads to a lower level of unemployment in the long run?

Correct AnswerverifiedShow Answer

If the Fed wants to reverse the effects of an adverse supply shock on unemployment, it should

Correct AnswerverifiedShow Answer

In the 1970s, the Fed accommodated an)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If people anticipate higher inflation, but inflation remains the same then

Correct AnswerverifiedShow Answer

What does an unexpected decrease in the growth rate of the money supply do to inflation and unemployment in the short-run? What does it do to inflation and unemployment in the long run?

Correct AnswerverifiedA decrease in the growth rate of the mon...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Some countries have inflation around or in excess of 8 percent. Suppose that the sacrifice ratio is 2.5. What is the cost of reducing inflation from 8 percent to 2 percent? In your answer, define the sacrifice ratio and explain how you found the cost of inflation reduction.

Correct AnswerverifiedThe sacrifice ratio gives the annual per...View AnswerShow Answer

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

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. The curve that is depicted on the right­hand graph offers policymakers a "menu" of combinations

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Samuelson and Solow argued that when unemployment is high, there is

Correct AnswerverifiedShow Answer

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Correct AnswerverifiedShow Answer

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Correct AnswerverifiedShow Answer

According to the Phillips curve, policymakers can reduce inflation by

Correct AnswerverifiedShow Answer

According to the Philips curve diagram, if a central bank takes action to reduce the inflation rate, unemployment is

Correct AnswerverifiedShow Answer

If a central bank decreases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Correct AnswerverifiedShow Answer

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct AnswerverifiedShow Answer

If there is an adverse supply shock, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A decrease in the growth rate of the mon...
View Answer

Correct Answer
verified

Correct Answer
verified
The sacrifice ratio gives the annual per...
View Answer

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. The curve that is depicted on the righthand graph offers policymakers a "menu" of combinations

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

Correct Answer
verified

Correct Answer
verified