Question 1

The very low inflation that the U.S. experienced in 2009 and 2010

Accepted Answer

A)   appears to have reduced expected inflation, and the short-run Phillips curve shifted downward as a result.
B)   appears to have reduced expected inflation, and the short-run Phillips curve shifted upward as a result.
C)   does not appear to have reduced expected inflation, and the short-run Phillips curve remained relatively stable as a result.
D)   does not appear to have reduced expected inflation, but the short-run Phillips curve shifted dramatically nevertheless.

Question 2

Contractionary monetary policy

Accepted Answer

A)   leads to disinflation and makes the short-run Phillips curve shift right.
B)   leads to disinflation and makes the short-run Phillips curve shift left.
C)   does not lead to disinflation but makes the short-run Phillips curve shift right.
D)   does not lead to disinflation but makes the short-run Phillips curve shift left.

Question 3

According to Friedman and Phelps, the unemployment rate

Accepted Answer

A)   is never below its natural rate.
B)   is below its natural rate when actual inflation is greater than expected inflation.
C)   is below its natural rate when actual inflation is less than expected inflation.
D)   is below its natural rate when actual inflation equals expected inflation.

Question 4

If inflation is greater than expected, then the unemployment rate is

Accepted Answer

A)   above the natural rate. In the long run the short-run Phillips curve will shift right.
B)   above the natural rate. In the long run the short-run Phillips curve will shift left.
C)   below the natural rate. In the long run the short-run Phillips curve will shift right.
D)   below the natural rate. In the long run the short-run Phillips curve will shift left.

Question 5

What evidence does the Volcker disinflation provide concerning the importance of inflation expectations to the costs of disinflation?

Accepted Answer

Unemployment did rise. However, the sacr...

Question 6

Suppose, as in the 1970's in the U.S., that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force. Would this have any effect on the long-run Phillips curve?

Accepted Answer

Since this would raise the nat...

Question 7

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Accepted Answer

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

Question 8

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Accepted Answer

A)   low, so there was upward pressure on wages and prices.
B)   low, so there was downward pressure on wages and prices.
C)   high, so there was upward pressure on wages and prices.
D)   high, so there was downward pressure on wages and prices.

Question 9

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.

Question 10

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Accepted Answer

The answer of A central bank pledges to reduce the...

Question 11

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.

Question 12

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Accepted Answer

A) True 
 B)False

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. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Accepted Answer

A)   the outcome of a favorable supply shock.
B)   falling inflation.
C)   stagflation.
D)   All of the above are correct.

Question 14

In the United States during the 1970s, expected inflation

Accepted Answer

A)   rose substantially.
B)   rose slightly.
C)   fell slightly.
D)   fell substantially.

Question 15

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Accepted Answer

A)   Mark gets an increase in his nominal wage.
B)   Bob gets more job offers.
C)   Susan reduces prices at her pizza restaurant.
D)   Tom reads that the central bank recently raised the money supply

Question 16

A favorable supply shock

Accepted Answer

A)   raises unemployment and the inflation rate.
B)   raises unemployment and reduces the inflation rate.
C)   reduces unemployment and raises the inflation rate.
D)   reduces unemployment and the inflation rate.

Question 17

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

Accepted Answer

A)   the economy moves down along the short-run Phillips curve.
B)   the economy moves up along the short-run Phillips curve.
C)   the Phillips curve shifts right.
D)   the Phillips curve shifts left.

Question 20

Figure 35-7
Use the two graphs in the diagram to answer the following questions.
  
-Refer to Figure 35-7. The economy would move from C to B

Accepted Answer

A)   in the short run if money supply growth increased unexpectedly.
B)   in the short run if money supply growth decreased unexpectedly.
C)   in the long run if money supply growth increases.
D)   in the long run if money supply growth decreases.

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

Correct Answer
verified

If more firms chose to pay efficiency wages, which of the following would shift to the right?

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

If inflation is greater than expected, then the unemployment rate is

Correct Answer
verified

According to Friedman and Phelps, the unemployment rate

Correct Answer
verified

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

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

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Correct Answer
verified

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

Correct Answer
verified

Contractionary monetary policy

Correct Answer
verified

What evidence does the Volcker disinflation provide concerning the importance of inflation expectations to the costs of disinflation?

Correct Answer
verified
Unemployment did rise. However, the sacr...
View Answer

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Correct Answer
verified

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Correct Answer
verified

Suppose, as in the 1970's in the U.S., that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force. Would this have any effect on the long-run Phillips curve?

Correct Answer
verified
Since this would raise the nat...
View Answer

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Correct Answer
verified

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

Correct Answer
verified

A favorable supply shock

Correct Answer
verified

In the United States during the 1970s, expected inflation

Correct Answer
verified

The very low inflation that the U.S. experienced in 2009 and 2010

Correct Answer
verified

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

Correct AnswerverifiedShow Answer

If more firms chose to pay efficiency wages, which of the following would shift to the right?

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

If inflation is greater than expected, then the unemployment rate is

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, the unemployment rate

Correct AnswerverifiedShow Answer

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

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

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

Correct AnswerverifiedShow Answer

Contractionary monetary policy

Correct AnswerverifiedShow Answer

What evidence does the Volcker disinflation provide concerning the importance of inflation expectations to the costs of disinflation?

Correct AnswerverifiedUnemployment did rise. However, the sacr...View AnswerShow Answer

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Correct AnswerverifiedShow Answer

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Correct AnswerverifiedShow Answer

Suppose, as in the 1970's in the U.S., that demographic groups which typically have higher unemployment rates become a larger percentage of the labor force. Would this have any effect on the long-run Phillips curve?

Correct AnswerverifiedSince this would raise the nat...View AnswerShow Answer

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A favorable supply shock

Correct AnswerverifiedShow Answer

In the United States during the 1970s, expected inflation

Correct AnswerverifiedShow Answer

The very low inflation that the U.S. experienced in 2009 and 2010

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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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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Unemployment did rise. However, the sacr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since this would raise the nat...
View Answer

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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