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Figure 16-4 Figure 16-4 -Refer to the Figure 16-4.Along SRPC3,what is the expected rate of inflation? A) 0 percent B) 2 percent C) 3 percent D) 5 percent -Refer to the Figure 16-4.Along SRPC3,what is the expected rate of inflation?


A) 0 percent
B) 2 percent
C) 3 percent
D) 5 percent

E) A) and B)
F) None of the above

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In the short run,policy that decreases the aggregate demand also decreases which of the following?


A) the price level
B) the unemployment rate
C) the aggregate supply
D) the natural rate of unemployment

E) C) and D)
F) None of the above

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How will an adverse supply shock shift the short-run Phillips curve,and how will it change unemployment?


A) It will shift the short-run Phillips curve right and raise unemployment.
B) It will shift the short-run Phillips curve right and lower unemployment.
C) It will shift the short-run Phillips curve left and raise unemployment.
D) It will shift the short-run Phillips curve left and lower unemployment.

E) C) and D)
F) B) and D)

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In the long run,if the Bank of Canada decreases the rate at which it increases the money supply,what will happen to inflation and unemployment?


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) Inflation will be lower and unemployment will stay the same.

E) B) and C)
F) All of the above

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If the short-run Phillips curve were stable,what would be unusual?


A) an increase in inflation and an increase in output
B) a decrease in inflation and an increase in unemployment
C) an increase in both inflation and unemployment
D) an increase in output and a decrease in unemployment

E) B) and D)
F) All of the above

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Figure 16-2 Figure 16-2 -Refer to the Figure 16-2.Suppose the economy is initially at point c.If the money supply increases,where does the economy move to in the short-run? A) b B) d C) e D) a -Refer to the Figure 16-2.Suppose the economy is initially at point c.If the money supply increases,where does the economy move to in the short-run?


A) b
B) d
C) e
D) a

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

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In the long run,what will happen if the Bank of Canada increases the rate at which it increases the money supply?


A) Inflation will be higher.
B) Unemployment will be lower.
C) Real GDP will be higher.
D) Unemployment will be higher.

E) C) and D)
F) B) and D)

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Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?


A) Unemployment would be higher,and output would be lower.
B) Unemployment would be higher,and output would be higher.
C) Unemployment would be lower,and output would be lower.
D) Unemployment would be lower,and output would be higher.

E) All of the above
F) A) and B)

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

A) True
B) False

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Faced with an adverse supply shock,what can policymakers increase,and how will prices and output be affected?


A) They can increase aggregate demand,which increases prices and output.
B) They can increase aggregate demand,which decreases prices and increases output.
C) They can increase aggregate supply,which increases prices and output.
D) They can increase aggregate supply,which decreases prices and increases output.

E) All of the above
F) A) and C)

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An estimate of the short-run Phillips curve for a hypothetical economy is u = 12 - 1.5ð,where u is the unemployment rate and ð is the inflation rate. a.If the natural rate of unemployment is 8 percent,what is the expected inflation rate that is consistent with this short-run Phillips curve? b.Suppose the government passes legislation that decreases the natural rate of unemployment by two percentage points.What is the new long-term inflation rate?

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a.The general equation of the short-run ...

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Who releases the closely watched indicators such as the inflation rate and unemployment each month?


A) Department for Business,Innovation,and Skills
B) Ministry of Finance
C) Department of the Treasury
D) Statistics Canada

E) A) and C)
F) C) and D)

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What did Friedman and Phelps argue about inflation and unemployment?


A) that in the long run,monetary growth did not influence those factors that determine the unemployment rate
B) that the Phillips curve could be exploited in the long run by using monetary,but not fiscal policy
C) that the short-run Phillips curve was very steep but the long-run curve was very flat
D) that there was neither a short-run nor long-run tradeoff between inflation and unemployment

E) A) and D)
F) None of the above

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Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

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In the short run,unemployment will rise,...

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What is a long-run economic aspect on which most economists agree?


A) The natural rate of unemployment depends primarily on the level of aggregate demand.
B) Inflation depends primarily upon the money supply growth rate.
C) There is a direct relationship between the inflation rate and the natural rate of unemployment.
D) The rate of economic growth depends primarily on the growth in money supply.

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

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Figure 16-4 Figure 16-4 -Refer to the Figure 16-4.Along SRPC1,what is the expected rate of inflation? A) 0 percent B) 2 percent C) 5 percent D) 8 percent -Refer to the Figure 16-4.Along SRPC1,what is the expected rate of inflation?


A) 0 percent
B) 2 percent
C) 5 percent
D) 8 percent

E) B) and D)
F) B) and C)

Correct Answer

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The Phillips curve and the short-run aggregate-supply curve are closely related,yet one slopes downward and the other slopes upward.Discuss.

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The Phillips curve shows the relation be...

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Figure 16-1 Figure 16-1 -Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in taxes move the economy? A) d and 2 B) e and 3 C) a and 3 D) b and 2 -Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in taxes move the economy?


A) d and 2
B) e and 3
C) a and 3
D) b and 2

E) A) and C)
F) None of the above

Correct Answer

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Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?


A) Prices,output,and employment all rise.
B) Prices and output rise,and employment falls.
C) Prices rise,and output and employment fall.
D) Prices fall,and output and employment rise.

E) C) and D)
F) All of the above

Correct Answer

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The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

A) True
B) False

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