Question 1

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Accepted Answer

A) True 
 B)False

Question 2

A policy change that changes the natural rate of unemployment changes

Accepted Answer

A)   neither the long-run Phillips curve nor the long-run aggregate supply curve.
B)   both the long-run Phillips curve and the long-run aggregate supply curve.
C)   the long-run Phillips curve, but not the long-run aggregate supply curve.
D)   the long-run aggregate supply curve, but not the long-run Phillips curve.E) B) and C)
F) A) and D)

Question 3

An adverse supply shock shifts the short-run Phillips curve to the

Accepted Answer

A)   right. This means the unemployment rate is higher at each inflation rate.
B)   right. This means the unemployment rate is lower at each inflation rate.
C)   left. This means the unemployment rate is higher at each inflation rate.
D)   left. This means the unemployment rate is lower at each inflation rate.E) C) and D)
F) All of the above

Question 4

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 5

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 6

Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output has to be given up in order to reduce the inflation rate from

Accepted Answer

A)   8 percent to 4 percent.
B)   8 percent to 5 percent.
C)   7 percent to 5 percent.
D)   7 percent to 6 percent.E) A) and D)
F) B) and C)

Question 7

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Accepted Answer

A)   both the unemployment rate and the inflation rate would be higher.
B)   both the unemployment rate and the inflation rate would be lower.
C)   the unemployment rate would be higher and the inflation rate would be lower.
D)   the unemployment rate would be lower and the inflation rate would be higher.E) A) and D)
F) A) and B)

Question 8

Consider two countries: Eastland and Westland. Eastland's long­run Phillips curve sits further to the right than does Westland's long­run Phillips curve. Eastland and Westland are identical in all other ways. In particular, they have the same money supply growth rates. In the long run, compared to Westland, which of the following will we observe in Eastland?

Accepted Answer

A)   higher unemployment and higher inflation.
B)   higher unemployment and the same rate of inflation.
C)   lower unemployment and higher inflation.
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 9

If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

Accepted Answer

Unemployment falls. The decrea...

Question 10

As aggregate demand shifts left along the short-run aggregate supply curve,

Accepted Answer

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

Question 11

Which of the following both make the sacrifice ratio higher than otherwise?

Accepted Answer

A)   the Phillips curve is steep, inflation expectations adjust quickly.
B)   the Phillips curve is steep, inflation expectations adjust slowly.
C)   the Phillips curve is flat, inflation expectations adjust quickly
D)   the Phillips curve is flat, inflation expectations adjust slowly.E) C) and D)
F) A) and B)

Question 12

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Accepted Answer

The answer of Assuming that rational expectations theory does not...

Question 13

Figure 35-9. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD)  curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."  
-Refer to Figure 35-9. What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A)   time
B)   the unemployment rate
C)   real GDP
D)   the growth rate of real GDPE) None of the above
F) B) and C)

Question 14

In most of the 1970s, the Fed's policy created expectations of high inflation.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation. If in the process of bringing inflation down by 2 percentage points, real GDP falls by 6 percent for a year, the sacrifice ratio is

Accepted Answer

A)   5.
B)   2.
C)   12.
D)   None of the above is correct.E) A) and C)
F) B) and C)

Question 16

Figure 35-3. 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 35-3. 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) B) and D)
F) None of the above

Question 17

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. What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   employment
D)   outputE) A) and B)
F) All of the above

Question 18

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

Question 19

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 20

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Accepted Answer

A)   1/2.
B)   1.
C)   2.
D)   4.E) C) and D)
F) A) and C)

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

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Correct Answer
verified

Figure 35-9. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. What is measured along the horizontal axis of the right-hand graph?

Correct Answer
verified

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Correct Answer
verified

An adverse supply shock shifts the short-run Phillips curve to the

Correct Answer
verified

As aggregate demand shifts left along the short-run aggregate supply curve,

Correct Answer
verified

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Correct Answer
verified

Correct Answer
verified

In most of the 1970s, the Fed's policy created expectations of high inflation.

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

Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output has to be given up in order to reduce the inflation rate from

Correct Answer
verified

A policy change that changes the natural rate of unemployment changes

Correct Answer
verified

If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

Correct Answer
verified
Unemployment falls. The decrea...
View 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 Answer
verified

Correct Answer
verified

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Correct Answer
verified

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Correct Answer
verified

Which of the following both make the sacrifice ratio higher than otherwise?

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. What is measured along the horizontal axis of the left-hand graph?

Correct Answer
verified

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation. If in the process of bringing inflation down by 2 percentage points, real GDP falls by 6 percent for a year, the sacrifice ratio is

Correct Answer
verified

If there is an adverse supply shock, then

Correct Answer
verified

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

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Correct AnswerverifiedShow Answer

Figure 35-9. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. What is measured along the horizontal axis of the right-hand graph?

Correct AnswerverifiedShow Answer

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve to the

Correct AnswerverifiedShow Answer

As aggregate demand shifts left along the short-run aggregate supply curve,

Correct AnswerverifiedShow Answer

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In most of the 1970s, the Fed's policy created expectations of high inflation.

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

Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output has to be given up in order to reduce the inflation rate from

Correct AnswerverifiedShow Answer

A policy change that changes the natural rate of unemployment changes

Correct AnswerverifiedShow Answer

If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

Correct AnswerverifiedUnemployment falls. The decrea...View AnswerShow 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

Correct AnswerverifiedShow Answer

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Correct AnswerverifiedShow Answer

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Correct AnswerverifiedShow Answer

Which of the following both make the sacrifice ratio higher than otherwise?

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. What is measured along the horizontal axis of the left-hand graph?

Correct AnswerverifiedShow Answer

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation. If in the process of bringing inflation down by 2 percentage points, real GDP falls by 6 percent for a year, the sacrifice ratio is

Correct AnswerverifiedShow Answer

If there is an adverse supply shock, then

Correct AnswerverifiedShow Answer

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Unemployment falls. The decrea...
View Answer

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