Question 1

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports.

Accepted Answer

A) True 
 B)False

Question 2

By paying an efficiency wage, employers give employees an incentive to shirk their duties.

Accepted Answer

A) True 
 B)False

Question 3

(Figure: Aggregate Supply and Demand Shifts)  The economy is originally at its long-run equilibrium, SRAS0 and AD0. Government policymakers signal that they intend to reduce aggregate demand from AD0 to AD1. If we assume that individuals have rational expectations, then the speed of the shift from SRAS0 to SRAS1 will happen: 0 and AD0. Government policymakers signal that they intend to reduce aggregate demand from AD0 to AD1. If we assume that individuals have rational expectations, then the speed of the shift from SRAS0 to SRAS1 will happen:   A)  almost immediately. B)  after a long lag. C)  only after the government finishes fully implementing its policy. D)  too slowly to affect the price level." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   almost immediately.
B)   after a long lag.
C)   only after the government finishes fully implementing its policy.
D)   too slowly to affect the price level.

Question 4

Adaptive expectations theory describes the use of _____ to form expectations of inflation.

Accepted Answer

A)   all publicly available information
B)   expected future policies
C)   present data
D)   past rates of inflation only

Question 5

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Accepted Answer

A)   2%
B)   5%
C)   8%
D)   15%

Question 6

According to the equation for the Phillips curve, if wages rise by 2%, inflation:

Accepted Answer

A)   must also rise by 2%.
B)   will be zero if productivity increases by 2%.
C)   will be zero if productivity increases by more than 2%.
D)   will be zero if productivity falls by 2%. B

Question 7

Monetized debt:

Accepted Answer

A)   is paid for by a decrease in the money supply.
B)   results in appreciation of the dollar.
C)   will result in a weaker dollar if foreigners hold fewer dollars.
D)   increases the burden of existing debt. C

Question 8

If inflationary expectations fall:

Accepted Answer

A)   there is a movement down along the Phillips curve.
B)   the Phillips curve shifts outward.
C)   the Phillips curve shifts inward.
D)   there is a movement up along the Phillips curve.

Question 9

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to:

Accepted Answer

A)   increase unemployment.
B)   shift the Phillips curve to the right.
C)   reduce tax revenues.
D)   shift the Phillips curve to the left.

Question 10

Which of these helps explain jobless recoveries?

Accepted Answer

A)   U.S. productivity has been decreasing.
B)   Firms have been unwilling to hire temporary workers until they know the demand for their product has reached prerecession levels.
C)   Firms are not willing to pay for overtime until the demand for their product recovers.
D)   Increased technology has enabled companies to use fewer workers.

Question 11

If wages rise by 3% and productivity rises by 2%, then prices can be expected to rise by 5%.

Accepted Answer

A) True 
 B)False

Question 12

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

Accepted Answer

A) True 
 B)False

Question 13

One of the primary assumptions of the rational expectations model is that:

Accepted Answer

A)   labor and product markets are highly competitive.
B)   people expect others to behave irrationally.
C)   labor markets exhibit short-term stickiness.
D)   prices do not adjust quickly to expansionary policies.

Question 14

(Figure: Understanding Phillips Curves)  What is the natural rate of unemployment associated with Phillips curve PCb? b?   A)  zero B)  3% C)  4% D)  5%" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   zero
B)   3%
C)   4%
D)   5%

Question 15

If policymakers want to keep unemployment below the natural rate, they must continually increase aggregate demand so that inflation is always greater than anticipated, thereby setting up an inflationary spiral.

Accepted Answer

A) True 
 B)False

Question 16

The adjustable-rate mortgage was the standard type before the early 2000s.

Accepted Answer

A) True 
 B)False

Question 17

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be:

Accepted Answer

A)   an increase in aggregate supply.
B)   a stable Phillips curve.
C)   increasing structural unemployment.
D)   accelerating inflation.

Question 18

Subprime mortgages were loans made to borrowers with _____ credit and who, as a result, were charged _____ interest rates.

Accepted Answer

A)   excellent; low
B)   excellent; high
C)   poor; low
D)   poor; high D

Question 19

Which of these is NOT a way that hiring practices have changed over the past few decades?

Accepted Answer

A)   Firms use more temporary workers.
B)   Firms are more likely to add overtime shifts for permanent employees.
C)   Firms are more likely to use just-in-time hiring practices.
D)   Firms are more likely to hire permanent employees.

Question 20

(Figure: Understanding Phillips Curves Shifts 2)  What would cause an outward shift from Phillips curve PC1 to Phillips curve PC0? 1 to Phillips curve PC0?   A)  a decrease in the expected inflation rate B)  an increase in the expected inflation rate C)  a decrease in the natural rate of unemployment D)  an increase in the natural rate of unemployment" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   a decrease in the expected inflation rate
B)   an increase in the expected inflation rate
C)   a decrease in the natural rate of unemployment
D)   an increase in the natural rate of unemployment

Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports.

Correct Answer
verified

By paying an efficiency wage, employers give employees an incentive to shirk their duties.

Correct Answer
verified

Correct Answer
verified

Adaptive expectations theory describes the use of _____ to form expectations of inflation.

Correct Answer
verified

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Correct Answer
verified

According to the equation for the Phillips curve, if wages rise by 2%, inflation:

Correct Answer
verified
B

Monetized debt:

Correct Answer
verified
C

If inflationary expectations fall:

Correct Answer
verified

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to:

Correct Answer
verified

Which of these helps explain jobless recoveries?

Correct Answer
verified

If wages rise by 3% and productivity rises by 2%, then prices can be expected to rise by 5%.

Correct Answer
verified

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

Correct Answer
verified

One of the primary assumptions of the rational expectations model is that:

Correct Answer
verified

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_b?

Correct Answer
verified

If policymakers want to keep unemployment below the natural rate, they must continually increase aggregate demand so that inflation is always greater than anticipated, thereby setting up an inflationary spiral.

Correct Answer
verified

The adjustable-rate mortgage was the standard type before the early 2000s.

Correct Answer
verified

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be:

Correct Answer
verified

Subprime mortgages were loans made to borrowers with _ credit and who, as a result, were charged _ interest rates.

Correct Answer
verified
D

Which of these is NOT a way that hiring practices have changed over the past few decades?

Correct Answer
verified

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC₁ to Phillips curve PC₀?

Correct Answer
verified

Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports.

Correct AnswerverifiedShow Answer

By paying an efficiency wage, employers give employees an incentive to shirk their duties.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Adaptive expectations theory describes the use of _____ to form expectations of inflation.

Correct AnswerverifiedShow Answer

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Correct AnswerverifiedShow Answer

According to the equation for the Phillips curve, if wages rise by 2%, inflation:

Correct AnswerverifiedB

Monetized debt:

Correct AnswerverifiedC

If inflationary expectations fall:

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to:

Correct AnswerverifiedShow Answer

Which of these helps explain jobless recoveries?

Correct AnswerverifiedShow Answer

If wages rise by 3% and productivity rises by 2%, then prices can be expected to rise by 5%.

Correct AnswerverifiedShow Answer

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

Correct AnswerverifiedShow Answer

One of the primary assumptions of the rational expectations model is that:

Correct AnswerverifiedShow Answer

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCb?

Correct AnswerverifiedShow Answer

If policymakers want to keep unemployment below the natural rate, they must continually increase aggregate demand so that inflation is always greater than anticipated, thereby setting up an inflationary spiral.

Correct AnswerverifiedShow Answer

The adjustable-rate mortgage was the standard type before the early 2000s.

Correct AnswerverifiedShow Answer

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be:

Correct AnswerverifiedShow Answer

Subprime mortgages were loans made to borrowers with _____ credit and who, as a result, were charged _____ interest rates.

Correct AnswerverifiedD

Which of these is NOT a way that hiring practices have changed over the past few decades?

Correct AnswerverifiedShow Answer

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC1 to Phillips curve PC0?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_b?

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Subprime mortgages were loans made to borrowers with _ credit and who, as a result, were charged _ interest rates.

Correct Answer
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D

Correct Answer
verified

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC₁ to Phillips curve PC₀?

Correct Answer
verified