Question 1

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, a decrease in the money supply moves the economy to

Accepted Answer

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

Question 2

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Accepted Answer

In the short run, unemployment will rise...

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Accepted Answer

A)   Bureau of the Budget.
B)   Bureau of Labor Statistics.
C)   Department of the Treasury.
D)   President's Council of Economic Advisors.E) None of the above
F) A) and B)

Question 5

Other things the same, if the central bank decreases the rate at which it increases the money supply, then

Accepted Answer

A)   unemployment and inflation rise in the short run.
B)   unemployment rises and inflation falls in the short run.
C)   unemployment falls and inflation rises in the short run.
D)   unemployment and inflation fall in the short run.E) B) and D)
F) A) and D)

Question 6

Which of the following is not associated with an adverse supply shock?

Accepted Answer

A)   the short-run Phillips curve shifts left
B)   unemployment rises
C)   the price level rises
D)   output fallsE) A) and D)
F) B) and C)

Question 7

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD curves. On the right-hand diagram, U represents the unemployment rate.
  
-Refer to Figure 35-1. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Accepted Answer

A)   point A on the left-hand graph.
B)   point B on the left-hand graph.
C)   point C on the left-hand graph.
D)   point D on the left-hand graph.E) A) and B)
F) A) and C)

Question 8

In 1979, when the Fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was

Accepted Answer

A)   1.
B)   5.
C)   7.
D)   10.E) None of the above
F) C) and D)

Question 9

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Accepted Answer

A)   unemployment equals the natural rate and expected inflation equals actual inflation.
B)   unemployment is above the natural rate and expected inflation equals actual inflation.
C)   unemployment equals the natural rate and expected inflation is greater than actual inflation.
D)   None of the above is necessarily correct.E) B) and D)
F) A) and B)

Question 10

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

Question 11

Monetary Policy in Flosserland
In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Flosserland. Suppose the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level. Suppose at first that the public thought inflation would only drop to 18%, but eventually become convinced that the inflation rate will stay at 12.5%.

Accepted Answer

A)   unemployment rises in the short run, and remains higher than it's original value in the long run.
B)   unemployment rises in the short run, and is the same as it's original value in the long run.
C)   unemployment falls in the short run, and is lower than it's original value in the long run.
D)   unemployment falls in the short run, and is the same as it's original value in the long run.E) All of the above
F) B) and C)

Question 12

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Accepted Answer

A)   unemployment rises. In the long run the short-run Phillips curve shifts left.
B)   unemployment rises. In the long run the short-run Phillips curve shifts right.
C)   unemployment falls. In the long run the short-run the Phillips curve shifts left.
D)   unemployment falls. In the long run the short-run the Phillips curve shifts right.E) None of the above
F) B) and C)

Question 13

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

Question 14

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

In 1980, the U.S. economy had an inflation rate of

Accepted Answer

A)   about 1 percent and an unemployment rate of about 7 percent.
B)   less than 4 percent and an unemployment rate of less than 6 percent.
C)   less than 7 percent and an unemployment rate of about 9 percent.
D)   more than 9 percent and an unemployment rate of about 7 percent.E) A) and B)
F) A) and C)

Question 17

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Accepted Answer

A)   both higher inflation and higher unemployment in the long run.
B)   higher inflation and no change in unemployment in the long run.
C)   the same inflation rate and lower unemployment in the long run.
D)   higher inflation and lower unemployment in the long runE) B) and C)
F) A) and D)

Question 18

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Accepted Answer

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

Question 19

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD curves. On the right-hand diagram, U represents the unemployment rate.
  
-Refer to Figure 35-1. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left- hand graph. Also suppose we know that the price index equaled 120 in 2011. Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Accepted Answer

A)   155 and 175, respectively.
B)   138 and 156, respectively.
C)   137.5 and 154.75, respectively.
D)   135 and 150, respectively.E) All of the above
F) A) and C)

Question 20

The idea that the long-run Phillips curve is

Accepted Answer

A)   vertical stems from the analysis of Samuelson and Solow.
B)   vertical stems from the analysis of Friedman and Phelps.
C)   vertical was disproved by the experiment that monetary and fiscal policymakers inadvertently created in the 1970s.
D)   downward-sloping can be correct if unemployment responds very quickly to unexpected inflation.E) C) and D)
F) A) and D)

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

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

Correct Answer
verified

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Correct Answer
verified

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Correct Answer
verified

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Correct Answer
verified

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, a decrease in the money supply moves the economy to

Correct Answer
verified

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct Answer
verified

Correct Answer
verified

The idea that the long-run Phillips curve is

Correct Answer
verified

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

Correct Answer
verified

Other things the same, if the central bank decreases the rate at which it increases the money supply, then

Correct Answer
verified

In 1979, when the Fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was

Correct Answer
verified

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

Correct Answer
verified

In 1980, the U.S. economy had an inflation rate of

Correct Answer
verified

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 Answer
verified

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Correct Answer
verified

Which of the following is not associated with an adverse supply shock?

Correct Answer
verified

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Correct Answer
verified

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct Answer
verified
In the short run, unemployment will rise...
View Answer

Correct Answer
verified

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Correct AnswerverifiedShow Answer

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Correct AnswerverifiedShow Answer

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

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, a decrease in the money supply moves the economy to

Correct AnswerverifiedShow Answer

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The idea that the long-run Phillips curve is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, if the central bank decreases the rate at which it increases the money supply, then

Correct AnswerverifiedShow Answer

In 1979, when the Fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 1980, the U.S. economy had an inflation rate of

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

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Correct AnswerverifiedShow Answer

Which of the following is not associated with an adverse supply shock?

Correct AnswerverifiedShow Answer

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Correct AnswerverifiedShow Answer

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct AnswerverifiedIn the short run, unemployment will rise...View AnswerShow Answer

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Correct AnswerverifiedShow Answer

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

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