Question 1

According to the Phillips curve,unemployment and inflation are positively related in

Accepted Answer

A)   the short run and in the long run.
B)   the short run,but not in the long run.
C)   the long run,but not in the short run.
D)   neither the long run nor the short run.E) A) and C)
F) B) and C)

Question 2

Country A's long-run Phillips curve is farther to the right than country B's.Country A and country B are identical in all other ways.In particular,they have the same money supply growth rates.In the long run as compared to country B country A will have

Accepted Answer

A)   higher unemployment and higher inflation.
B)   higher unemployment and the same rate of inflation.
C)   lower unemployment and higher inflation.
D)   None of the above is correct.E) All of the above
F) B) and D)

Question 3

In 1979,Fed chair Paul Volcker decided to pursue a policy

Accepted Answer

A)   that would lead to disinflation.
B)   that would create falling prices.
C)   to accommodate continuing adverse supply shocks.
D)   that maintained money growth at its current level.E) All of the above
F) C) and D)

Question 4

If the government raises government expenditures,then in the short run prices

Accepted Answer

A)   rise and unemployment falls.
B)   fall and unemployment rises.
C)   and unemployment rise.
D)   and unemployment fall.E) All of the above
F) C) and D)

Question 5

In 1980,the U.S.misery index was

Accepted Answer

A)   much higher than average.
B)   slightly higher than average.
C)   about average.
D)   below average.E) A) and D)
F) A) and B)

Question 6

Suppose that the money supply increases.In the short run this decreases unemployment according to

Accepted Answer

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

Question 7

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A)   the short-run Phillips curve shifts left
B)   unemployment falls
C)   the price level rises
D)   output rises.E) B) and C)
F) C) and D)

Question 8

There is a temporary adverse supply shock.Given the effects of this shock,if the central bank chooses to return unemployment closer to its previous rate it would

Accepted Answer

A)   raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right.
B)   raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left.
C)   reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right.
D)   reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left.E) A) and C)
F) C) and D)

Question 9

In the 1970s,the Fed accommodated a(n)

Accepted Answer

A)   adverse supply shock and so contributed to higher inflation.
B)   adverse supply shock and so contributed to lower inflation.
C)   favorable supply shock and so contributed to higher inflation.
D)   favorable supply shock and so contributed to lower inflation.E) A) and B)
F) None of the above

Question 10

The large increase in oil prices in the 1970s was caused primarily by a(n)

Accepted Answer

A)   increase in demand for oil.
B)   decrease in demand for oil.
C)   decrease in the supply of oil.
D)   increase in the supply of oil.E) None of the above
F) A) and C)

Question 11

Figure 22-8.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." 1 to AS2 could be a consequence of A)  an increase in the money supply. B)  an adverse supply shock. C)  a decrease of output from Y1 to Y2. D)  a slow adjustment of people's expectation of the inflation rate." class="answers-bank-image d-inline" rel="preload" > 1 to AS2 could be a consequence of A)  an increase in the money supply. B)  an adverse supply shock. C)  a decrease of output from Y1 to Y2. D)  a slow adjustment of people's expectation of the inflation rate." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-8.The shift of the aggregate-supply curve from AS1 to AS2 could be a consequence of

Accepted Answer

A)   an increase in the money supply.
B)   an adverse supply shock.
C)   a decrease of output from Y1 to Y2.
D)   a slow adjustment of people's expectation of the inflation rate.E) A) and B)
F) A) and C)

Question 12

If efficiency wages became more common,

Accepted Answer

A)   both the long-run Phillips curve and the long-run aggregate supply curve would shift right.
B)   both the long-run Phillips curve and the long-run aggregate supply curve would shift left.
C)   the long-run Phillips curve would shift right,and the long-run aggregate supply curve would shift left.
D)   the long-run Phillips curve would shift left,and the long-run aggregate supply curve would shift right.E) None of the above
F) A) and B)

Question 13

If there is an adverse supply shock,then

Accepted Answer

A)   unemployment rises and the short-run Phillips curve shifts right.
B)   unemployment rises and the short-run Phillips curve shifts left.
C)   unemployment falls and the short-run Phillips curve shifts right.
D)   unemployment falls and the short-run Phillips curve shifts left.E) C) and D)
F) B) and D)

Question 14

Figure 22-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate.

-Refer to Figure 22-1.What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   employment
D)   outputE) B) and D)
F) A) and D)

Question 15

The idea that the long-run Phillips curve is

Accepted Answer

A)   vertical stems from the analysis of Samuelson and Solow.
B)   vertical stems from the analysis of Friedman and Phelps.
C)   vertical was disproved by the experiment that monetary and fiscal policymakers inadvertently created in the 1970s.
D)   downward-sloping can be correct if unemployment responds very quickly to unexpected inflation.E) None of the above
F) A) and B)

Question 16

Samuelson and Solow argued that when unemployment is high,there is

Accepted Answer

A)   upward pressures on wages and prices.
B)   upward pressures on wages and downward pressures on prices.
C)   upward pressures on prices and downward pressures on wages.
D)   downward pressures on wages and prices.E) A) and D)
F) None of the above

Question 17

The long-run response to a decrease in the money supply growth rate is shown by shifting

Accepted Answer

A)   the short-run and long-run Phillips curves left.
B)   the short-run and long-run Phillips curves right.
C)   only the short-run Phillips curve left.
D)   only the short-run Phillips curve right.E) A) and D)
F) All of the above

Question 18

An adverse supply shock shifts the short-run Phillips curve right.If people raise their inflation expectations,the short-run Phillips curve shifts farther right.

Accepted Answer

A) True 
 B)False

Question 19

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

Accepted Answer

A)   5/2.
B)   3/2.
C)   2/3.
D)   2/5.E) B) and C)
F) A) and D)

Question 20

A central bank that accommodates an aggregate supply shock

Accepted Answer

A)   increases the money supply,making the inflation rate rise.
B)   increases the money supply,making the inflation rate fall.
C)   decreases the money supply,making the inflation rate rise.
D)   decreases the money supply,making the inflation rate fall.E) A) and B)
F) B) and D)

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

If the government raises government expenditures,then in the short run prices

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There is a temporary adverse supply shock.Given the effects of this shock,if the central bank chooses to return unemployment closer to its previous rate it would

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If efficiency wages became more common,

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In 1980,the U.S.misery index was

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If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

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According to the Phillips curve,unemployment and inflation are positively related in

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A central bank that accommodates an aggregate supply shock

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Suppose that the money supply increases.In the short run this decreases unemployment according to

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Country A's long-run Phillips curve is farther to the right than country B's.Country A and country B are identical in all other ways.In particular,they have the same money supply growth rates.In the long run as compared to country B country A will have

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Samuelson and Solow argued that when unemployment is high,there is

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Figure 22-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate. -Refer to Figure 22-1.What is measured along the horizontal axis of the left-hand graph?

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If there is an adverse supply shock,then

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The long-run response to a decrease in the money supply growth rate is shown by shifting

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Figure 22-8.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 22-8.The shift of the aggregate-supply curve from AS1 to AS2 could be a consequence of

Correct AnswerverifiedShow Answer

The idea that the long-run Phillips curve is

Correct AnswerverifiedShow Answer

In the 1970s,the Fed accommodated a(n)

Correct AnswerverifiedShow Answer

Which of the following would not be associated with a favorable supply shock?

Correct AnswerverifiedShow Answer

The large increase in oil prices in the 1970s was caused primarily by a(n)

Correct AnswerverifiedShow Answer

In 1979,Fed chair Paul Volcker decided to pursue a policy

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve right.If people raise their inflation expectations,the short-run Phillips curve shifts farther right.

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Figure 22-8.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 22-8.The shift of the aggregate-supply curve from AS₁ to AS₂ could be a consequence of

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