Question 1

Use the following to answer questions: 0 is the Phillips curve with an expected inflation rate of zero;SRPC2 is the Phillips curve with an expected inflation rate of 2%. Refer to Figure: Expected Inflation and the Short-Run Phillips Curve.Suppose that this economy has an unemployment rate of 6%,inflation of 2%,and an expectation of 2% inflation.If the central bank increases the money supply such that aggregate demand shifts to the right and unemployment falls to 4%,then inflation will: A)  fall to -2%. B)  not change. C)  rise to 2%. D)  rise to 4%." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Expected Inflation and the Short-Run Phillips Curve) 
SRPC0 is the Phillips curve with an expected inflation rate of zero;SRPC2 is the Phillips curve with an expected inflation rate of 2%.
Refer to Figure: Expected Inflation and the Short-Run Phillips Curve.Suppose that this economy has an unemployment rate of 6%,inflation of 2%,and an expectation of 2% inflation.If the central bank increases the money supply such that aggregate demand shifts to the right and unemployment falls to 4%,then inflation will:

Accepted Answer

A)   fall to -2%.
B)   not change.
C)   rise to 2%.
D)   rise to 4%.

Question 2

Deflation:

Accepted Answer

A)   hurts borrowers and helps lenders.
B)   helps borrowers and hurts lenders.
C)   unlike inflation,affects neither borrowers nor lenders.
D)   affects only lenders.

Question 3

The debt is monetized when:

Accepted Answer

A)   the budget is approved by the federal government.
B)   the Bank of Canada buys back debt via open-market purchases.
C)   the government raises taxes.
D)   transfer payments are decreased.

Question 4

If a central bank pursues an expansionary monetary policy:

Accepted Answer

A)   the aggregate price level and level of real GDP will increase in the short run.
B)   the level of real GDP will increase,but the aggregate price level will stay the same in the long run.
C)   nominal prices and nominal wages will be unaffected in the long run.
D)   the aggregate price level will increase and the level of real GDP will decrease in the short run.

Question 5

Use the following to answer question : E with a price level of P1. Which of the following would represent the new long-run equilibrium position if the aggregate demand curve shifted to the right from AD1 to AD2 as a result of an increase in the money supply? A)  YE and P2 B)  YE and P1 C)  Y1 and P2 D)  YE and P3" class="answers-bank-image d-inline" rel="preload" >
-(Figure: AD-AS Model) Refer to Figure: AD-AS Model.Suppose that the economy is at YE with a price level of P1. Which of the following would represent the new long-run equilibrium position if the aggregate demand curve shifted to the right from AD1 to AD2 as a result of an increase in the money supply?

Accepted Answer

A)   YE and P2
B)   YE and P1
C)   Y1 and P2
D)   YE and P3

Question 6

When inflation is high:

Accepted Answer

A)   people will increase their level of real-money holdings.
B)   people will save more.
C)   lenders gain at the expense of borrowers.
D)   people will decrease their level of real-money holdings.

Question 7

According to the short-run Phillips curve,when actual real GDP is _____ potential output,the price level _____ and the unemployment rate falls.

Accepted Answer

A)   below;increases
B)   above;decreases
C)   below;decreases
D)   above;increases

Question 8

Workers in country A have wage contracts for cost-of-living adjustments (COLAs) ,which adjust wages to offset the effect of inflation,and workers in country B do not.When the central banks of countries A and B increase the money supply:

Accepted Answer

A)   prices in country A increase faster than prices in country B.
B)   prices in country B increase faster than prices in country A.
C)   prices in countries A and B will change at the same rate.
D)   COLAs have no effect on the speed of price changes.

Question 9

Use the following to answer questions: 
-(Figure: Actual and Natural Rates of Unemployment) Refer to Figure: Actual and Natural Rates of Unemployment.In 2000,the output gap was:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   impossible to determine without more information.

Question 10

To bring disinflation to an economy,policy makers must:

Accepted Answer

A)   slow down labour productivity growth.
B)   increase the money supply to release the economy from the liquidity trap.
C)   keep unemployment below its natural rate for an extended period.
D)   announce and commit to a credible policy of disinflation.

Question 11

If an economy finds itself in a liquidity trap:

Accepted Answer

A)   consumers are trapped by an abundance of liquidity and are spending abundantly.
B)   the economy is trapped by the inability of monetary policy to reduce nominal interest rates further.
C)   money markets are trapped in a state of continuous disequilibrium.
D)   monetary authorities cannot stop nominal interest rates from rising.

Question 12

If the money supply grows by 4% and the real money supply is $100 billion,real seigniorage is:

Accepted Answer

A)   $4 billion.
B)   $25 billion.
C)   $400 billion.
D)   $2.5 trillion.

Question 13

Policies that reduce inflation are popular with voters because they lead to higher output and lower unemployment.

Accepted Answer

A) True 
 B)False

Question 14

When economists state that there is a zero bound on nominal interest rates,they mean that the:

Accepted Answer

A)   real interest rate cannot go below zero.
B)   nominal interest rate cannot go below zero.
C)   real interest rate can very well be negative.
D)   nominal interest rate can always go below zero.

Question 15

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply,the price level,and real GDP is that according to classical economists,_____,while today's economists _____.

Accepted Answer

A)   money is neutral in the long run;do not consider money to be neutral in the long run
B)   the adjustment of prices takes some time;expect changes in the money supply to be instantaneous
C)   who did not consider money to be neutral in the long run;consider money neutral in the long run
D)   the adjustment of prices to changes in the money supply is instantaneous;argue that this adjustment process takes some time

Question 16

An inflation tax is the effect on the public of a reduction in the value of money caused by inflation.

Accepted Answer

A) True 
 B)False

Question 17

The short-run Phillips curve represents the relationship between the unemployment rate and the rate of change in:

Accepted Answer

A)   the interest rate.
B)   output.
C)   wages only.
D)   the aggregate price level.

Question 18

If actual output growth is 5% when potential output growth is 5%,then the unemployment rate will:

Accepted Answer

A)   not change.
B)   rise.
C)   fall.
D)   be zero.

Question 19

During hyperinflation in Germany in 1922-1923,prices rose at _____% per day.

Accepted Answer

A)   0.1
B)   16
C)   50
D)   100

Question 20

The inflation tax is the effect on the public of:

Accepted Answer

A)   the increase in the real value of money caused by inflation.
B)   the decrease in the real value of money caused by inflation.
C)   the result of indexing wages to inflation.
D)   cost of living adjustments.

Exam 16: Inflation, Disinflation, and Deflation

According to the short-run Phillips curve,when actual real GDP is _ potential output,the price level _ and the unemployment rate falls.

Correct Answer
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Correct Answer
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The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply,the price level,and real GDP is that according to classical economists,_,while today's economists _.

Correct Answer
verified

During hyperinflation in Germany in 1922-1923,prices rose at _____% per day.

Correct Answer
verified

Policies that reduce inflation are popular with voters because they lead to higher output and lower unemployment.

Correct Answer
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Use the following to answer questions: -(Figure: Actual and Natural Rates of Unemployment) Refer to Figure: Actual and Natural Rates of Unemployment.In 2000,the output gap was:

Correct Answer
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If the money supply grows by 4% and the real money supply is $100 billion,real seigniorage is:

Correct Answer
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When economists state that there is a zero bound on nominal interest rates,they mean that the:

Correct Answer
verified

The short-run Phillips curve represents the relationship between the unemployment rate and the rate of change in:

Correct Answer
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Correct Answer
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If a central bank pursues an expansionary monetary policy:

Correct Answer
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If actual output growth is 5% when potential output growth is 5%,then the unemployment rate will:

Correct Answer
verified

The debt is monetized when:

Correct Answer
verified

An inflation tax is the effect on the public of a reduction in the value of money caused by inflation.

Correct Answer
verified

To bring disinflation to an economy,policy makers must:

Correct Answer
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When inflation is high:

Correct Answer
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Workers in country A have wage contracts for cost-of-living adjustments (COLAs) ,which adjust wages to offset the effect of inflation,and workers in country B do not.When the central banks of countries A and B increase the money supply:

Correct Answer
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The inflation tax is the effect on the public of:

Correct Answer
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If an economy finds itself in a liquidity trap:

Correct Answer
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Deflation:

Correct Answer
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Exam 16: Inflation, Disinflation, and Deflation

According to the short-run Phillips curve,when actual real GDP is _____ potential output,the price level _____ and the unemployment rate falls.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply,the price level,and real GDP is that according to classical economists,_____,while today's economists _____.

Correct AnswerverifiedShow Answer

During hyperinflation in Germany in 1922-1923,prices rose at _____% per day.

Correct AnswerverifiedShow Answer

Policies that reduce inflation are popular with voters because they lead to higher output and lower unemployment.

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Figure: Actual and Natural Rates of Unemployment) Refer to Figure: Actual and Natural Rates of Unemployment.In 2000,the output gap was:

Correct AnswerverifiedShow Answer

If the money supply grows by 4% and the real money supply is $100 billion,real seigniorage is:

Correct AnswerverifiedShow Answer

When economists state that there is a zero bound on nominal interest rates,they mean that the:

Correct AnswerverifiedShow Answer

The short-run Phillips curve represents the relationship between the unemployment rate and the rate of change in:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a central bank pursues an expansionary monetary policy:

Correct AnswerverifiedShow Answer

If actual output growth is 5% when potential output growth is 5%,then the unemployment rate will:

Correct AnswerverifiedShow Answer

The debt is monetized when:

Correct AnswerverifiedShow Answer

An inflation tax is the effect on the public of a reduction in the value of money caused by inflation.

Correct AnswerverifiedShow Answer

To bring disinflation to an economy,policy makers must:

Correct AnswerverifiedShow Answer

When inflation is high:

Correct AnswerverifiedShow Answer

Workers in country A have wage contracts for cost-of-living adjustments (COLAs) ,which adjust wages to offset the effect of inflation,and workers in country B do not.When the central banks of countries A and B increase the money supply:

Correct AnswerverifiedShow Answer

The inflation tax is the effect on the public of:

Correct AnswerverifiedShow Answer

If an economy finds itself in a liquidity trap:

Correct AnswerverifiedShow Answer

Deflation:

Correct AnswerverifiedShow Answer

According to the short-run Phillips curve,when actual real GDP is _ potential output,the price level _ and the unemployment rate falls.

Correct Answer
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Correct Answer
verified

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply,the price level,and real GDP is that according to classical economists,_,while today's economists _.

Correct Answer
verified

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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Correct Answer
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