Question 1

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Accepted Answer

Eventually the economy moves back to the...

Question 2

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Accepted Answer

A)   and the inflation rate rise.
B)   and the inflation rate fall.
C)   rises and the inflation rate falls.
D)   falls and the inflation rate rises.E) B) and D)
F) None of the above

Question 3

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

Accepted Answer

A)   the short-run Phillips curve shifts right.
B)   the short-run Phillips curve shifts left.
C)   the long-run Phillips curve shifts right.
D)   the long-run Phillips curve shifts left.E) A) and C)
F) A) and B)

Question 4

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 5

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)   unemployment and inflation are higher.
B)   unemployment and inflation are lower.
C)   unemployment is higher and inflation is lower.
D)   unemployment is lower and inflation is higher.E) A) and B)
F) A) and C)

Question 8

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Accepted Answer

The price level and output ris...

Question 9

Figure 35-7
Use the two graphs in the diagram to answer the following questions.
  
-Refer to Figure 35-7. 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) None of the above
F) B) and C)

Question 10

If people believe that the central bank is going to reduce inflation, then

Accepted Answer

A)   the short-run Phillips curve shifts right and the sacrifice ratio will rise.
B)   the short-run Phillips curve shifts right and the sacrifice ratio will fall.
C)   the short-run Phillips curve shifts left and the sacrifice ratio will rise.
D)   the short-run Phillips curve shifts left and the sacrifice ratio will fall.E) B) and D)
F) All of the above

Question 11

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 12

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. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to

Accepted Answer

A)   point A on the left-hand graph.
B)   point B on the left-hand graph.
C)   point C on the left-hand graph.
D)   point D on the left-hand graph.E) All of the above
F) A) and B)

Question 13

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

Accepted Answer

A)   to a lower unemployment rate and a lower inflation rate than policy B.
B)   to a lower unemployment rate and a higher inflation rate than policy B.
C)   to a higher unemployment rate and lower inflation rate than policy B.
D)   to a higher unemployment rate and higher inflation rate than policy B.E) B) and D)
F) B) and C)

Question 14

Data for the United States traced out an almost perfect Phillips curve for much of the

Accepted Answer

A)   1960s.
B)   1970s.
C)   1980s.
D)   1990s.E) B) and D)
F) B) and C)

Question 15

In the late 1960s, economist Edmund Phelps published a paper that

Accepted Answer

A)   argued that there was no long-run tradeoff between inflation and unemployment.
B)   disproved Friedman's claim that monetary policy was effective in controlling inflation.
C)   showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent.
D)   argued that the Phillips curve was stable and that it would not shift.E) A) and B)
F) C) and D)

Question 16

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

Question 17

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

Accepted Answer

A)   Its position is determined primarily by monetary factors.
B)   If it shifts right, long-run aggregate supply shifts right.
C)   It cannot be changed by any government policy.
D)   Its position depends on the natural rate of unemployment.E) B) and C)
F) All of the above

Question 18

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. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Accepted Answer

A)   point A on the left-hand graph.
B)   point B on the left-hand graph.
C)   point C on the left-hand graph.
D)   point D on the left-hand graph.E) None of the above
F) A) and D)

Question 19

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Accepted Answer

A)   it seemed to work for wages but not for inflation.
B)   monetary policy was ineffective in combating inflation.
C)   the Phillips curve did not apply in the long run.
D)   Phillips had made errors in collecting his data.E) None of the above
F) A) and B)

Question 20

Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short- run consequence of this contraction?

Accepted Answer

A)   The inflation rate decreases.
B)   The level of output decreases.
C)   The unemployment rate increases.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

If people believe that the central bank is going to reduce inflation, then

Correct Answer
verified

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

Correct Answer
verified

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Correct Answer
verified
Eventually the economy moves back to the...
View Answer

Data for the United States traced out an almost perfect Phillips curve for much of the

Correct Answer
verified

Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short- run consequence of this contraction?

Correct Answer
verified

Correct Answer
verified

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct Answer
verified

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

According to the Phillips curve, policymakers can reduce inflation by

Correct Answer
verified

Correct Answer
verified

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Correct Answer
verified

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

Correct Answer
verified

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from 3 to 5

Correct Answer
verified

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Correct Answer
verified

In the late 1960s, economist Edmund Phelps published a paper that

Correct Answer
verified

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct Answer
verified

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Correct Answer
verified
The price level and output ris...
View Answer

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

If people believe that the central bank is going to reduce inflation, then

Correct AnswerverifiedShow Answer

Other things the same, if the central bank decreases the rate at which it increases the money supply, then in the long run

Correct AnswerverifiedShow Answer

Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument.

Correct AnswerverifiedEventually the economy moves back to the...View AnswerShow Answer

Data for the United States traced out an almost perfect Phillips curve for much of the

Correct AnswerverifiedShow Answer

Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short- run consequence of this contraction?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct AnswerverifiedShow Answer

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the Phillips curve, policymakers can reduce inflation by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from 3 to 5

Correct AnswerverifiedShow Answer

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Correct AnswerverifiedShow Answer

In the late 1960s, economist Edmund Phelps published a paper that

Correct AnswerverifiedShow Answer

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct AnswerverifiedShow Answer

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Correct AnswerverifiedThe price level and output ris...View AnswerShow Answer

Correct Answer
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Correct Answer
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Eventually the economy moves back to the...
View Answer

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The price level and output ris...
View Answer