Question 1

An increase in the price of oil shifts the

Accepted Answer

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

Question 2

France has a higher natural rate of unemployment than the United States.This suggests that

Accepted Answer

A)   France is at a higher point on its long-run Phillips curve and so has higher inflation than the United States.
B)   France is at a lower point on its long-run Phillips curve and so has lower inflation than the United States.
C)   France's Phillips curve is to the left of that of the United States,possibly because they have higher inflation.
D)   France's Phillips curve is to the right of that of the United States,possibly because they have more generous unemployment compensation.E) A) and C)
F) A) and B)

Question 3

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.What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A)   time
B)   the unemployment rate
C)   real GDP
D)   the growth rate of real GDPE) A) and D)
F) B) and D)

Question 4

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Accepted Answer

A) True 
 B)False

Question 5

The short-run Phillips curve is based on the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is vertical?

Accepted Answer

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

Question 7

An increase in expected inflation shifts

Accepted Answer

A)   the long-run Phillips curve right.
B)   the short-run Phillips curve right.
C)   neither the short-run nor long-run Phillips curve right.
D)   both the short-run and long-run Phillips curve right.E) A) and B)
F) B) and C)

Question 8

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)   unemployment and inflation are higher.
B)   unemployment and inflation are lower.
C)   unemployment is higher and inflation is lower.
D)   unemployment is lower and inflation is higher.E) All of the above
F) A) and B)

Question 9

In the long run people come to expect whatever inflation rate the Fed chooses to produce,so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 10

Over the long run the Volcker disinflation

Accepted Answer

A)   shifted the short-run and long-run Phillips curves left.
B)   shifted the short-run,but not the long-run Phillips curve left.
C)   shifted the long-run,but not the short-run Phillips curve left.
D)   None of the above is correct.E) A) and B)
F) B) and D)

Question 11

The sacrifice ratio is the

Accepted Answer

A)   sum of the inflation and unemployment rates.
B)   inflation rate divided by the unemployment rate.
C)   number of percentage points annual output falls for each percentage point reduction in inflation.
D)   number of percentage points unemployment rises for each percentage point reduction in inflation.E) B) and D)
F) None of the above

Question 12

Country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's.In the long run as compared to country B,country A will have

Accepted Answer

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

Question 13

Figure 22-4 
-Which of the following is upward-sloping?

Accepted Answer

A)   both the long-run and the short-run Phillips curve
B)   neither the long-run nor the short-run Phillips curve
C)   the long-run Phillips curve,but not the short-run Phillips curve
D)   the short-run Phillips curve,but not the long-run Phillips curveE) A) and C)
F) A) and B)

Question 14

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.E) A) and C)
F) A) and B)

Question 15

Suppose that the central bank unexpectedly increases the growth rate of the money supply.In the short run the effects of this are shown by

Accepted Answer

A)   moving to the left along the short-run Phillips curve.
B)   moving to the right along the short-run Phillips curve.
C)   shifting the short-run Phillips curve to the right.
D)   shifting the short-run Phillips curve to the left.E) All of the above
F) A) and D)

Question 16

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

A)   downward pressures on prices and wages.
B)   downward pressures on prices and upward pressures on wages.
C)   upward pressures on prices and downward pressures on wages.
D)   upward pressures on prices and wages.E) B) and C)
F) A) and B)

Question 17

Suppose expected inflation and actual inflation are both relatively high,and unemployment is at its natural rate.If the Fed then pursues a contractionary monetary policy,which of the following results would be expected in the short run?

Accepted Answer

A)   Expected inflation would exceed actual inflation,and unemployment would exceed its natural rate.
B)   Expected inflation would exceed actual inflation,and unemployment would be below its natural rate.
C)   Actual inflation would exceed expected inflation,and unemployment would exceed its natural rate.
D)   Actual inflation would exceed expected inflation,and unemployment would be below its natural rate.E) B) and C)
F) C) and D)

Question 18

Which of the following would tend to shorten recessions associated with anti-inflation policies by central banks?

Accepted Answer

A)   People adjust their expectations of inflation rapidly.
B)   People believe policy announcements made by central bank officials.
C)   The short-run Phillips shifts rapidly.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 19

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve.  Which of the following statements is correct?

Accepted Answer

A)   These points are consistent with the theoretical long-run Phillips curve,but not with the short-run Phillips curve.
B)   These points are consistent with the theoretical short-run Phillips curve,but not with the long-run Phillips curve.
C)   These points are consistent with both the theoretical short-run and long-run Phillips curves.
D)   These points are not consistent with either the theoretical short-run or long-run Phillips curves.E) All of the above
F) B) and C)

Question 20

If there is a favorable supply shock which direction does the short-run Phillips curve shift? What initially happens to unemployment and inflation as a result of this shock?

Accepted Answer

The short-run Philli...

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

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.What is measured along the horizontal axis of the right-hand graph?

Correct AnswerverifiedShow Answer

The sacrifice ratio is the

Correct AnswerverifiedShow Answer

If there is a favorable supply shock which direction does the short-run Phillips curve shift? What initially happens to unemployment and inflation as a result of this shock?

Correct AnswerverifiedThe short-run Philli...View AnswerShow Answer

An increase in the price of oil shifts the

Correct AnswerverifiedShow Answer

Figure 22-4 -Which of the following is upward-sloping?

Correct AnswerverifiedShow Answer

Which of the following is vertical?

Correct AnswerverifiedShow Answer

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct AnswerverifiedShow Answer

Suppose expected inflation and actual inflation are both relatively high,and unemployment is at its natural rate.If the Fed then pursues a contractionary monetary policy,which of the following results would be expected in the short run?

Correct AnswerverifiedShow Answer

Country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's.In the long run as compared to country B,country A will have

Correct AnswerverifiedShow Answer

Over the long run the Volcker disinflation

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts

Correct AnswerverifiedShow Answer

France has a higher natural rate of unemployment than the United States.This suggests that

Correct AnswerverifiedShow Answer

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct AnswerverifiedShow Answer

A favorable supply shock

Correct AnswerverifiedShow Answer

Suppose that the central bank unexpectedly increases the growth rate of the money supply.In the short run the effects of this are shown by

Correct AnswerverifiedShow Answer

In the long run people come to expect whatever inflation rate the Fed chooses to produce,so unemployment returns to its natural rate.

Correct AnswerverifiedShow Answer

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following would tend to shorten recessions associated with anti-inflation policies by central banks?

Correct AnswerverifiedShow Answer

The short-run Phillips curve is based on the classical dichotomy.

Correct AnswerverifiedShow Answer

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Correct AnswerverifiedShow Answer

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The short-run Philli...
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