Question 1

Suppose the economy is in long-run equilibrium at an inflation rate of 1% Then inflation expectations rise to 2% and inflation rises to 3%. The increase in expected inflation shifts the short-run Phillips curve

Accepted Answer

A)   right. Overall, unemployment moves above its natural rate.
B)   right. Overall, unemployment moves below its natural rate.
C)   left. Overall, unemployment moves above its natural rate.
D)   left. Overall, unemployment moves below its natural rate.E) A) and B)
F) A) and D)

Question 2

If inflation expectations decline, then the short-run Phillips curve shifts

Accepted Answer

A)   left, so that at any inflation rate unemployment is lower in the short run than before.
B)   right, so that at any inflation rate unemployment is lower in the short run than before.
C)   right, so that at any inflation rate unemployment is higher in the short run than before.
D)   left, so that at any inflation rate unemployment is higher in the short run than before.E) A) and B)
F) C) and D)

Question 3

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 C)
F) None of the above

Question 4

Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that

Accepted Answer

A)   the rational expectations hypothesis is false.
B)   the rational expectations hypothesis is true.
C)   the policymakers lacked credibility.
D)   None of the above is certain.E) C) and D)
F) A) and B)

Question 5

In the long run, which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)   an increase in the minimum wage
B)   an increase in government spending
C)   an increase in the money supply
D)   a decrease in the money supplyE) B) and D)
F) B) and C)

Question 6

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

Question 7

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 8

What is meant by the natural rate of unemployment?

Accepted Answer

It is the rate of un...

Question 9

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Accepted Answer

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

Question 10

Other things the same, a decrease in aggregate demand decreases both inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 11

If taxes rise, then aggregate demand shifts

Accepted Answer

A)   right, making unemployment higher than otherwise.
B)   right, making unemployment lower than otherwise.
C)   left, making unemployment higher than otherwise.
D)   left, making unemployment lower than otherwise.E) A) and B)
F) B) and C)

Question 12

Figure 35-2
Use the pair of diagrams below to answer the following questions.
  
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Accepted Answer

A)   A and 2.
B)   D and 3.
C)   E and 3.
D)   None of the above is correct.E) B) and D)
F) B) and C)

Question 13

Disinflation is a

Accepted Answer

A)   reduction in the price level, whereas deflation is a reduction in the rate of inflation.
B)   reduction in the rate of inflation, whereas deflation is a reduction in the price level.
C)   slow reduction in the price level, whereas deflation is a rapid reduction in the price level.
D)   rapid reduction in the price level, whereas deflation is a slow reduction in the price level.E) C) and D)
F) B) and D)

Question 14

If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage points and unemployment rises 2 percentage points for one year, the sacrifice ratio is

Accepted Answer

A)   1/5.
B)   2.
C)   5/2.
D)   5.E) None of the above
F) A) and C)

Question 15

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. A significant increase in the world price of oil could explain

Accepted Answer

A)   the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the shift of the Phillips curve from PC1 to PC2.
B)   the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of the aggregate-supply curve from AS1 to AS2.
C)   both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2.
D)   neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2.E) A) and B)
F) A) and D)

Question 16

According to the Phillips curve, which fiscal policies can be used to reduce unemployment in the short run?

Accepted Answer

An increase in gover...

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

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

What is meant by the natural rate of unemployment?

Correct Answer
verified
It is the rate of un...
View Answer

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Correct Answer
verified

If taxes rise, then aggregate demand shifts

Correct Answer
verified

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

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. A significant increase in the world price of oil could explain

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

According to the Phillips curve, which fiscal policies can be used to reduce unemployment in the short run?

Correct Answer
verified
An increase in gover...
View Answer

If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage points and unemployment rises 2 percentage points for one year, the sacrifice ratio is

Correct Answer
verified

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct Answer
verified

Suppose the economy is in long-run equilibrium at an inflation rate of 1% Then inflation expectations rise to 2% and inflation rises to 3%. The increase in expected inflation shifts the short-run Phillips curve

Correct Answer
verified

Other things the same, a decrease in aggregate demand decreases both inflation and unemployment.

Correct Answer
verified

Disinflation is a

Correct Answer
verified

If inflation expectations decline, then the short-run Phillips curve shifts

Correct Answer
verified

Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that

Correct Answer
verified

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Correct Answer
verified

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

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

What is meant by the natural rate of unemployment?

Correct AnswerverifiedIt is the rate of un...View AnswerShow Answer

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Correct AnswerverifiedShow Answer

If taxes rise, then aggregate demand shifts

Correct AnswerverifiedShow Answer

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

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. A significant increase in the world price of oil could explain

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

According to the Phillips curve, which fiscal policies can be used to reduce unemployment in the short run?

Correct AnswerverifiedAn increase in gover...View AnswerShow Answer

If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage points and unemployment rises 2 percentage points for one year, the sacrifice ratio is

Correct AnswerverifiedShow Answer

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium at an inflation rate of 1% Then inflation expectations rise to 2% and inflation rises to 3%. The increase in expected inflation shifts the short-run Phillips curve

Correct AnswerverifiedShow Answer

Other things the same, a decrease in aggregate demand decreases both inflation and unemployment.

Correct AnswerverifiedShow Answer

Disinflation is a

Correct AnswerverifiedShow Answer

If inflation expectations decline, then the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
It is the rate of un...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An increase in gover...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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