Question 1

If inflation expectations decline, then the short-run Phillips curve shifts

Accepted Answer

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

Question 2

If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

Accepted Answer

Unemployment falls. The decrea...

Question 3

In his famous article published in an economics journal in 1958, A.W. Phillips

Accepted Answer

A)   used data for the United States to show a negative relationship between the rate of change of the U.S. consumer price index and the U.S. unemployment rate.
B)   used data for the United States to show a negative relationship between the rate of change of wages in the U.S. and the U.S. unemployment rate.
C)   used data for the United Kingdom to show a negative relationship between the rate of change of the U.K. consumer price index and the U.K. unemployment rate.
D)   used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate.E) All of the above
F) B) and D)

Question 4

In the long run, a decrease in the money supply growth rate

Accepted Answer

A)   reduces expected inflation so the long-run Phillips curve shifts left.
B)   reduces expected inflation so the short-run Phillips curve shifts left.
C)   Both A and B are correct.
D)   None of the above is correct.E) B) and C)
F) A) and C)

Question 5

If taxes rise, then aggregate demand shifts

Accepted Answer

A)   right, making unemployment higher than otherwise.
B)   right, making unemployment lower than otherwise.
C)   left, making unemployment higher than otherwise.
D)   left, making unemployment lower than otherwise.E) B) and C)
F) All of the above

Question 6

Figure 35-2
Use the pair of diagrams below to answer the following questions.
  
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to

Accepted Answer

A)   A and 1
B)   B and 2
C)   C and 3
D)   None of the above is correct.E) All of the above
F) None of the above

Question 7

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Accepted Answer

A)   right and the sacrifice ratio would fall.
B)   right and the sacrifice ratio would rise.
C)   left and the sacrifice ratio would fall.
D)   left and the sacrifice ratio would rise.E) B) and D)
F) A) and D)

Question 8

If the short-run Phillips curve were stable, which of the following would be unusual?

Accepted Answer

A)   an increase in government spending and a fall in unemployment
B)   an increase in inflation and a decrease in output
C)   a decrease in the inflation rate and a rise in the unemployment rate
D)   a decrease in the money supply and a rise in the unemployment rate.E) All of the above
F) B) and C)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A)   inflation but not the unemployment rate; this is consistent with classical theory.
B)   inflation but not the unemployment rate; this is inconsistent with classical theory.
C)   the unemployment rate but not inflation; this is consistent with classical theory.
D)   the unemployment rate but not inflation; this is inconsistent with classical theory.E) A) and D)
F) A) and B)

Question 11

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Accepted Answer

A)   shift both the short-run aggregate supply and the short-run Phillips curve right.
B)   shift both the short-run aggregate supply and the short-run Phillips curve left.
C)   shift the short-run aggregate supply curve to the right, and the short-run Phillips curve to the left.
D)   shift the short-run aggregate supply curve to the left, and the short-run Phillips curve to the right.E) A) and B)
F) B) and C)

Question 12

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Accepted Answer

A) True 
 B)False

Question 13

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. The money supply growth rate is greatest at

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   F.E) None of the above
F) B) and D)

Question 14

Between 1993 and 2001 the U.S. economy experienced

Accepted Answer

A)   relatively low inflation and unemployment rates.
B)   relatively high inflation and unemployment rates.
C)   relatively low inflation rates and relatively high unemployment rates.
D)   relatively high inflation rates and relatively low unemployment rates.E) C) and D)
F) B) and D)

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

Question 16

Economist A.W. Phillips found a negative correlation between

Accepted Answer

A)   output and unemployment.
B)   unemployment and the interest rate.
C)   output and the interest rate.
D)   wage inflation and unemployment.E) None of the above
F) A) and C)

Question 17

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

Accepted Answer

A)   increasing the money supply.
B)   increasing government expenditures.
C)   raising taxes.
D)   None of the above is correct.E) B) and D)
F) A) and B)

Question 18

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Accepted Answer

A)   negative correlation between the rate of unemployment and the rate of inflation.
B)   positive correlation between the rate of unemployment and the rate of inflation.
C)   negative correlation between the rate of unemployment and the rate of interest.
D)   positive correlation between the rate of unemployment and the rate of interestE) A) and C)
F) All of the above

Question 19

In response to the financial crisis of 2007-2008, policymakers used

Accepted Answer

A)   expansionary monetary policy and expansionary fiscal policy.
B)   expansionary monetary policy and contractionary fiscal policy.
C)   contractionary monetary policy and expansionary fiscal policy.
D)   contractionary monetary policy and contractionary fiscal policy.E) A) and D)
F) All of the above

Question 20

An adverse supply shock shifts the short-run Phillips curve to the

Accepted Answer

A)   right. This means the unemployment rate is higher at each inflation rate.
B)   right. This means the unemployment rate is lower at each inflation rate.
C)   left. This means the unemployment rate is higher at each inflation rate.
D)   left. This means the unemployment rate is lower at each inflation rate.E) A) and D)
F) A) and C)

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

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If inflation expectations decline, then the short-run Phillips curve shifts

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If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

Correct AnswerverifiedUnemployment falls. The decrea...View AnswerShow Answer

If the short-run Phillips curve were stable, which of the following would be unusual?

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In the long run, a decrease in the money supply growth rate

Correct AnswerverifiedShow Answer

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve to the

Correct AnswerverifiedShow Answer

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Correct AnswerverifiedShow Answer

In his famous article published in an economics journal in 1958, A.W. Phillips

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Economist A.W. Phillips found a negative correlation between

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

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Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. The money supply growth rate is greatest at

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Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve, in the long run monetary policy influences

Correct AnswerverifiedShow Answer

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

Correct AnswerverifiedShow Answer

If taxes rise, then aggregate demand shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Between 1993 and 2001 the U.S. economy experienced

Correct AnswerverifiedShow Answer

In response to the financial crisis of 2007-2008, policymakers used

Correct AnswerverifiedShow Answer

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Unemployment falls. The decrea...
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