Question 1

One determinant of the long-run average unemployment rate is the

Accepted Answer

A)  market power of unions, while the inflation rate depends primarily upon government spending.
B)  minimum wage, while the inflation rate depends primarily upon the money supply growth rate.
C)  rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions.
D)  existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive.E) None of the above
F) B) and D)

Question 2

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) B) and C)
F) A) and D)

Question 3

The arguments of Friedman and Phelps would suggest that other things the same a country that pursues a disinflationary policy

Accepted Answer

A)  should not see an increase in the unemployment rate even in the short run.
B)  will having rising unemployment for a while, but then return to the natural rate of unemployment.
C)  will have a permanently higher unemployment rate.
D)  None of the above is suggested by the arguments of Friedman and Phelps.E) B) and C)
F) C) and D)

Question 4

A.W.Phillips' findings were based on data

Accepted Answer

A)  from 1861-1957 for the United Kingdom.
B)  from 1861-1957 for the United States.
C)  mostly from the post-World War II period in the United Kingdom.
D)  mostly from the post-World War II period in the United States.E) A) and B)
F) A) and C)

Question 5

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) None of the above
F) B) and C)

Question 6

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

Accepted Answer

A)  1.
B)  2.
C)  3.
D)  4.E) A) and C)
F) B) and C)

Question 7

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) A) and D)
F) All of the above

Question 8

According to the Friedman-Phelps analysis,in the long run,actual inflation equals expected inflation,and unemployment is at its natural rate.

Accepted Answer

A) True 
 B)False

Question 9

Use the graph below to answer the following questions.
Figure 35-2
 
-Refer to Figure 35-2.If the economy starts at c and the money supply growth rate increases,in the long run the economy

Accepted Answer

A)  stays at c.
B)  moves to b.
C)  moves to e.
D)  None of the above is correct.E) None of the above
F) A) and B)

Question 10

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation.A few years later the inflation rate has been reduced,but there had also been a serious recession.We could conclude with certainty that

Accepted Answer

A)  the rational expectations hypothesis is false.
B)  the rational expectations hypothesis is true.
C)  the policymakers lacked credibility.
D)  None of the above is certain.E) A) and B)
F) A) and C)

Question 12

In 2001,Congress and President Bush instituted tax cuts.According to the short-run Phillips curve this change should have

Accepted Answer

A)  reduced inflation and unemployment.
B)  raised inflation and unemployment.
C)  reduce inflation and raised unemployment.
D)  raised inflation and reduced unemployment.E) A) and D)
F) B) and D)

Question 13

Monetary Policy in Hyperion
In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Hyperion.Suppose that the Hyperion Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Hyperions believe their government then which,if any,curve(s) shift left?

Accepted Answer

A)  the short-run and the long-run Phillips curve
B)  the short-run but not the long run Phillips curve
C)  the long-run but not the short-run Phillips curve
D)  neither the short-run nor the long-run Phillips curveE) A) and C)
F) None of the above

Question 14

In the long run,policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level.
B)  neither unemployment nor the price level.
C)  only unemployment.
D)  only the price level.E) A) and C)
F) A) and B)

Question 15

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)  reduced both unemployment and inflation.
B)  reduced inflation significantly, but at the cost of a severe recession.
C)  reduced unemployment significantly, but at the cost of higher inflation.
D)  raised both unemployment and inflation.E) All of the above
F) B) and C)

Question 16

A movement to the left along a given short-run Phillips curve could be caused by

Accepted Answer

A)  a reduction in the natural rate of unemployment or expansionary monetary policy.
B)  expansionary monetary policy, but not a reduction in the natural rate of unemployment.
C)  either a reduction in the natural rate of unemployment or a contractionary monetary policy.
D)  contractionary monetary policy, but not a reduction in the natural rate of unemployment.E) A) and D)
F) A) and C)

Question 17

Which of the following is downward sloping?

Accepted Answer

A)  both the long-run Phillips curve and the short-run Phillips curve
B)  neither the long-run Phillips curve 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) B) and C)
F) A) and D)

Question 18

Which of the following is correct if there is an adverse supply shock?

Accepted Answer

A)  The short-run aggregate supply curve and the short-run Phillips curve both shift right.
B)  The short-run aggregate supply curve and the short-run Phillips curve both shift left.
C)  The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
D)  The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.E) All of the above
F) B) and C)

Question 19

Suppose that the money supply increases.In the short run,this increases prices 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 aggregate supply model.
D)  the aggregate demand and aggregate supply model but not the short-run Phillips curve.E) A) and B)
F) All of the above

Question 20

A favorable supply shock will shift short-run aggregate supply

Accepted Answer

A)  left, making output rise.
B)  left, making output fall.
C)  right, making output rise.
D)  right, making output fall.E) All of the above
F) B) and D)

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

A movement to the left along a given short-run Phillips curve could be caused by

Correct Answer
verified

The arguments of Friedman and Phelps would suggest that other things the same a country that pursues a disinflationary policy

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following is downward sloping?

Correct Answer
verified

Suppose that the money supply increases.In the short run,this increases prices according to

Correct Answer
verified

In the long run,policy that changes aggregate demand changes

Correct Answer
verified

Which of the following is correct if there is an adverse supply shock?

Correct Answer
verified

Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation.A few years later the inflation rate has been reduced,but there had also been a serious recession.We could conclude with certainty that

Correct Answer
verified

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

Correct Answer
verified

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.If the economy starts at c and the money supply growth rate increases,in the long run the economy

Correct Answer
verified

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Correct Answer
verified

An increase in expected inflation shifts

Correct Answer
verified

Correct Answer
verified

A favorable supply shock will shift short-run aggregate supply

Correct Answer
verified

According to the Friedman-Phelps analysis,in the long run,actual inflation equals expected inflation,and unemployment is at its natural rate.

Correct Answer
verified

A.W.Phillips' findings were based on data

Correct Answer
verified

One determinant of the long-run average unemployment rate is the

Correct Answer
verified

In 2001,Congress and President Bush instituted tax cuts.According to the short-run Phillips curve this change should have

Correct Answer
verified

The restrictive monetary policy followed by the Fed in the early 1980s

Correct Answer
verified

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

A movement to the left along a given short-run Phillips curve could be caused by

Correct AnswerverifiedShow Answer

The arguments of Friedman and Phelps would suggest that other things the same a country that pursues a disinflationary policy

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is downward sloping?

Correct AnswerverifiedShow Answer

Suppose that the money supply increases.In the short run,this increases prices according to

Correct AnswerverifiedShow Answer

In the long run,policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

Which of the following is correct if there is an adverse supply shock?

Correct AnswerverifiedShow Answer

Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation.A few years later the inflation rate has been reduced,but there had also been a serious recession.We could conclude with certainty that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.If the economy starts at c and the money supply growth rate increases,in the long run the economy

Correct AnswerverifiedShow Answer

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A favorable supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

According to the Friedman-Phelps analysis,in the long run,actual inflation equals expected inflation,and unemployment is at its natural rate.

Correct AnswerverifiedShow Answer

A.W.Phillips' findings were based on data

Correct AnswerverifiedShow Answer

One determinant of the long-run average unemployment rate is the

Correct AnswerverifiedShow Answer

In 2001,Congress and President Bush instituted tax cuts.According to the short-run Phillips curve this change should have

Correct AnswerverifiedShow Answer

The restrictive monetary policy followed by the Fed in the early 1980s

Correct AnswerverifiedShow Answer

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