Question 1

If consumer confidence falls, then aggregate demand shifts

Accepted Answer

A)  right, raising the inflation rate above its previous level.
B)  right, lowering the inflation rate below its previous level.
C)  left, raising the inflation rate above its previous level.
D)  left, lowering the inflation rate below its previous level.E) B) and C)
F) A) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Accepted Answer

A)  B.
B)  D.
C)  F.
D)  None of the above is consistent with an increase in the money supply growth rate.E) None of the above
F) A) and B)

Question 4

In the long run, if the Fed decreases the rate at which it increases the money supply,

Accepted Answer

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

Question 5

A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?

Accepted Answer

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

Question 6

In the United States during the 1970s, expected inflation

Accepted Answer

A)  rose substantially.
B)  rose slightly.
C)  fell slightly.
D)  fell substantially.E) A) and D)
F) C) and D)

Question 7

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Accepted Answer

A) True 
 B)False

Question 8

If a central bank decreases the money supply, then

Accepted Answer

A)  prices, output, and unemployment rise.
B)  prices and output rise and unemployment falls.
C)  prices rise and output and unemployment fall.
D)  prices and output fall and unemployment rises.E) A) and C)
F) A) and B)

Question 9

If the central bank increases the money supply, in the short run, output

Accepted Answer

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

Question 10

The short-run relationship between inflation and unemployment is often called

Accepted Answer

A)  the Classical Dichotomy.
B)  Money Neutrality.
C)  the Phillips curve.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 11

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Accepted Answer

A) True 
 B)False

Question 12

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A)  right, so that at any inflation rate unemployment is higher in the short run than before.
B)  left, so that at any inflation rate unemployment is higher in the short run than before.
C)  right, so that at any inflation rate unemployment is lower in the short run than before.
D)  left, so that at any inflation rate unemployment is lower in the short run than before.E) C) and D)
F) B) and D)

Question 13

If the Fed reduces inflation 1 percentage point and this makes output fall 2 percentage points and unemployment rise 3 percentage points for six months, the sacrifice ratio is

Accepted Answer

A)  1.
B)  2.
C)  3.
D)  4.E) All of the above
F) A) and B)

Question 14

Unemployment would decrease and prices would increase if

Accepted Answer

A)  aggregate demand shifted right.
B)  aggregate demand shifted left.
C)  aggregate supply shifted right.
D)  aggregate supply shifted left.E) B) and C)
F) C) and D)

Question 15

To say that the natural rate of unemployment changes over time is to say that

Accepted Answer

A)  the short-run Phillips curve shifts over time.
B)  the long-run Phillips curve shifts over time.
C)  the aggregate demand curve shifts over time.
D)  the Federal Reserve influences the natural rate of unemployment over time.E) All of the above
F) A) and C)

Question 16

Some economists argue suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work. For example, if a government cuts money growth but makes no real fiscal reforms, people will expect the government will eventually need to expand the money supply to pay for its expenditures. Thus, the promise to fight inflation will not be credible. Explain why credibility is important to a reduction in the inflation rate.

Accepted Answer

If people believe that the government re...

Question 17

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Accepted Answer

A)  the inflation rate decreases.
B)  the government increases its expenditures.
C)  the Fed increases the money supply.
D)  None of the above is correct.E) A) and D)
F) All of the above

Question 18

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

Accepted Answer

A)  The economy will move up and to the left along the short-run Phillips Curve.
B)  The economy will move down and to the right along the short-run Phillips Curve.
C)  ​The short-run Phillips Curve will shift to the left.
D)  ​The short-run Phillips Curve will shift to the right.E) C) and D)
F) None of the above

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

If consumer confidence falls, then aggregate demand shifts

Correct Answer
verified

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Correct Answer
verified

Unemployment would decrease and prices would increase if

Correct Answer
verified

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Correct Answer
verified

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Correct Answer
verified

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct Answer
verified

The short-run relationship between inflation and unemployment is often called

Correct Answer
verified

In the United States during the 1970s, expected inflation

Correct Answer
verified

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

Correct Answer
verified

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

Correct Answer
verified

To say that the natural rate of unemployment changes over time is to say that

Correct Answer
verified

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Correct Answer
verified

A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?

Correct Answer
verified

In the long run, if the Fed decreases the rate at which it increases the money supply,

Correct Answer
verified

If the Fed reduces inflation 1 percentage point and this makes output fall 2 percentage points and unemployment rise 3 percentage points for six months, the sacrifice ratio is

Correct Answer
verified

If the central bank increases the money supply, in the short run, output

Correct Answer
verified

If inflation expectations rise, the short-run Phillips curve shifts

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

Correct Answer
verified
If people believe that the government re...
View Answer

If a central bank decreases the money supply, then

Correct Answer
verified

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

If consumer confidence falls, then aggregate demand shifts

Correct AnswerverifiedShow Answer

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Correct AnswerverifiedShow Answer

Unemployment would decrease and prices would increase if

Correct AnswerverifiedShow Answer

The economy will move to a point on the short-run Phillips curve where unemployment is higher if

Correct AnswerverifiedShow Answer

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Correct AnswerverifiedShow Answer

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct AnswerverifiedShow Answer

The short-run relationship between inflation and unemployment is often called

Correct AnswerverifiedShow Answer

In the United States during the 1970s, expected inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

Correct AnswerverifiedShow Answer

To say that the natural rate of unemployment changes over time is to say that

Correct AnswerverifiedShow Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Correct AnswerverifiedShow Answer

A central bank pledges to reduce the inflation rate from 20% to 5%. People reduce their inflation expectations to 10%, but the central bank only reduces inflation to 15%. What happens to the unemployment rate?

Correct AnswerverifiedShow Answer

In the long run, if the Fed decreases the rate at which it increases the money supply,

Correct AnswerverifiedShow Answer

If the Fed reduces inflation 1 percentage point and this makes output fall 2 percentage points and unemployment rise 3 percentage points for six months, the sacrifice ratio is

Correct AnswerverifiedShow Answer

If the central bank increases the money supply, in the short run, output

Correct AnswerverifiedShow Answer

If inflation expectations rise, the short-run Phillips curve shifts

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

Correct AnswerverifiedIf people believe that the government re...View AnswerShow Answer

If a central bank decreases the money supply, then

Correct AnswerverifiedShow 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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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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified
If people believe that the government re...
View Answer

Correct Answer
verified