Question 1

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

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

Question 2

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 C)
F) A) and B)

Question 3

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?

Accepted Answer

A)   the unemployment rate and the inflation rate
B)   the unemployment rate but not the inflation rate
C)   the inflation rate but not the unemployment rate
D)   neither the inflation rate nor the unemployment rateE) B) and C)
F) C) and D)

Question 5

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A)   left. If inflation remains the same, unemployment falls.
B)   left. If inflation remains the same, unemployment rises.
C)   right. If inflation remains the same, unemployment falls.
D)   right. If inflation remains the same, unemployment rises.E) None of the above
F) B) and C)

Question 6

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

Accepted Answer

A)   unemployment and prices rise.
B)   unemployment rises and prices fall.
C)   unemployment falls and prices rise.
D)   unemployment and prices fall.E) A) and B)
F) C) and D)

Question 7

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

Question 8

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 9

A favorable supply shock will cause inflation to

Accepted Answer

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

Question 10

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 11

Samuelson and Solow believed that the Phillips curve

Accepted Answer

A)   implied that low unemployment was associated with low inflation.
B)   indicated that the aggregate supply and aggregate demand model was incorrect.
C)   offered policymakers a menu of possible economic outcomes from which to choose.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 12

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

Question 13

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Accepted Answer

A) True 
 B)False

Question 14

The theory by which people optimally use all available information when forecasting the future is known as

Accepted Answer

A)   rational expectations.
B)   perfect expectations.
C)   credible expectations.
D)   predictive expectations.E) A) and D)
F) C) and D)

Question 15

Friedman argued that the Fed could use monetary policy to peg

Accepted Answer

A)   the level of real GDP.
B)   the growth rate of real GDP.
C)   the rate of unemployment.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 16

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

Accepted Answer

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

Question 17

Refer to The Economy in 2008. In the short run the increased prices of world commodities

Accepted Answer

A)   raised both the price level and output.
B)   raised the price level and reduced output.
C)   reduced the price level and raised output.
D)   reduced both the price level and output.E) A) and C)
F) B) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Accepted Answer

A) True 
 B)False

Question 20

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

Accepted Answer

A)   10%
B)   8%
C)   6%
D)   None of the above is correct.E) A) and C)
F) None of the above

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

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

Correct Answer
verified

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

Correct Answer
verified

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

Correct Answer
verified

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

Correct Answer
verified

Refer to The Economy in 2008. In the short run the increased prices of world commodities

Correct Answer
verified

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

Correct Answer
verified

If inflation expectations rise, the short-run Phillips curve shifts

Correct Answer
verified

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

Correct Answer
verified

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct Answer
verified

A favorable supply shock will cause inflation to

Correct Answer
verified

Friedman argued that the Fed could use monetary policy to peg

Correct Answer
verified

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Correct Answer
verified

Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?

Correct Answer
verified

Samuelson and Solow believed that the Phillips curve

Correct Answer
verified

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

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct Answer
verified

The theory by which people optimally use all available information when forecasting the future is known as

Correct Answer
verified

If inflation expectations rise, the short-run Phillips curve shifts

Correct Answer
verified

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Correct Answer
verified

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

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to The Economy in 2008. In the short run the increased prices of world commodities

Correct AnswerverifiedShow Answer

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

Correct AnswerverifiedShow Answer

If inflation expectations rise, the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct AnswerverifiedShow Answer

A favorable supply shock will cause inflation to

Correct AnswerverifiedShow Answer

Friedman argued that the Fed could use monetary policy to peg

Correct AnswerverifiedShow Answer

In the long run, the inflation rate depends primarily on the growth rate of the money supply.

Correct AnswerverifiedShow Answer

Suppose the central bank increases the growth rate of the money supply. In the long run, which of the following is unaffected by this change in policy?

Correct AnswerverifiedShow Answer

Samuelson and Solow believed that the Phillips curve

Correct AnswerverifiedShow Answer

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

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct AnswerverifiedShow Answer

The theory by which people optimally use all available information when forecasting the future is known as

Correct AnswerverifiedShow Answer

If inflation expectations rise, the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified