Question 1

Which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)   expansionary fiscal policy
B)   an increase in the inflation rate
C)   increases in unemployment compensation
D)   None of the above is correct.E) All of the above
F) C) and D)

Question 2

If inflation is greater than expected, then the unemployment rate is

Accepted Answer

A)   above the natural rate. In the long run the short-run Phillips curve will shift right.
B)   above the natural rate. In the long run the short-run Phillips curve will shift left.
C)   below the natural rate. In the long run the short-run Phillips curve will shift right.
D)   below the natural rate. In the long run the short-run Phillips curve will shift left.E) A) and B)
F) A) and C)

Question 3

If a central bank reduced inflation by 2 percentage points and that made output fall by 3 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Accepted Answer

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

Question 4

Disinflation is like

Accepted Answer

A)   slowing a car down, whereas deflation is like putting the car into reverse gear.
B)   maintaining a car's speed, whereas deflation is like slowing the car down.
C)   putting a car into reverse gear, whereas deflation is like slowing the car down.
D)   maintaining a car's speed, whereas deflation is like putting the car into reverse gear.E) A) and B)
F) All of the above

Question 5

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

Question 6

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Accepted Answer

Both the long-run and the shor...

Question 7

How does a central bank's accommodation of an adverse supply shock change the long­run results of the shock?

Accepted Answer

If a central bank accommodates an advers...

Question 8

Unexpectedly high inflation reduces unemployment in the short run, but as inflation expectations adjust the unemployment rate returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 9

By about 1973, U.S. policymakers had learned that

Accepted Answer

A)   there is no trade-off between inflation and unemployment in the short run.
B)   there is no trade-off between inflation and unemployment in the long run.
C)   Friedman's analysis of inflation and unemployment had been correct, and Phelps's analysis of inflation and unemployment had been incorrect.
D)   Phelps's analysis of inflation and unemployment had been correct, and Friedman's analysis of inflation and unemployment had been incorrect.E) B) and C)
F) None of the above

Question 10

Write the equation representing the short-run Phillips curve.

Accepted Answer

Unemployment rate = ...

Question 11

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Accepted Answer

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

Question 12

The sacrifice ratio is the

Accepted Answer

A)   sum of the inflation and unemployment rates.
B)   inflation rate divided by the unemployment rate.
C)   number of percentage points annual output falls for each percentage point reduction in inflation.
D)   number of percentage points unemployment rises for each percentage point reduction in inflation.E) C) and D)
F) B) and D)

Question 13

When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that

Accepted Answer

A)   if they contract aggregate demand, the unemployment rate will increase further.
B)   if they expand aggregate demand, the inflation rate will increase further.
C)   they face a less favorable trade-off between inflation and unemployment than they did before the shock.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 14

Which of the following is correct if there is a favorable 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) B) and C)
F) A) and D)

Question 15

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Accepted Answer

A)   3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
B)   3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.
C)   7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
D)   7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.E) A) and D)
F) A) and C)

Question 16

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Accepted Answer

A)   an increase in both the inflation rate and the unemployment rate.
B)   an increase in the inflation rate and a reduction in the unemployment rate.
C)   no change in either the inflation rate or the unemployment rate.
D)   an increase in the inflation rate and no change in the unemployment rate.E) A) and B)
F) A) and C)

Question 17

If the natural rate of unemployment falls,

Accepted Answer

A)   both the short-run and long-run Phillips curves shift left.
B)   the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged.
C)   the short-run Phillips curve is unchanged, the long-run Phillips curve shifts right.
D)   the short-run and the long-run Phillips curves shift right.E) A) and B)
F) B) and D)

Question 18

Samuelson and Solow argued that

Accepted Answer

A)   high unemployment puts upward pressures on wages and prices.
B)   given the historical evidence, a combination of low inflation and low unemployment was not possible.
C)   Both A and B are correct.
D)   None of the above are correct.E) A) and D)
F) A) and C)

Question 19

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

Accepted Answer

The answer of A central bank raises the money supply...

Question 20

The misery index is supposed to measure the

Accepted Answer

A)   social cost of unemployment.
B)   health of the economy.
C)   lost output associated with a particular unemployment rate.
D)   short-run tradeoff between inflation and unemployment.E) B) and C)
F) A) and D)

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Correct AnswerverifiedShow Answer

Which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

The sacrifice ratio is the

Correct AnswerverifiedShow Answer

Which of the following is correct if there is a favorable supply shock?

Correct AnswerverifiedShow Answer

If the natural rate of unemployment falls,

Correct AnswerverifiedShow Answer

Write the equation representing the short-run Phillips curve.

Correct AnswerverifiedUnemployment rate = ...View AnswerShow Answer

Samuelson and Solow argued that

Correct AnswerverifiedShow Answer

If inflation is greater than expected, then the unemployment rate is

Correct AnswerverifiedShow Answer

When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that

Correct AnswerverifiedShow Answer

If a central bank reduced inflation by 2 percentage points and that made output fall by 3 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Correct AnswerverifiedShow Answer

Disinflation is like

Correct AnswerverifiedShow Answer

How does a central bank's accommodation of an adverse supply shock change the long­run results of the shock?

Correct AnswerverifiedIf a central bank accommodates an advers...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The misery index is supposed to measure the

Correct AnswerverifiedShow Answer

By about 1973, U.S. policymakers had learned that

Correct AnswerverifiedShow Answer

How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Correct AnswerverifiedBoth the long-run and the shor...View AnswerShow Answer

Unexpectedly high inflation reduces unemployment in the short run, but as inflation expectations adjust the unemployment rate returns to its natural rate.

Correct AnswerverifiedShow Answer

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Correct AnswerverifiedShow Answer

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

Correct AnswerverifiedShow Answer

Figure 35-8 Use this graph to answer the questions below. -Refer to figure 35-8. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Unemployment rate = ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

How does a central bank's accommodation of an adverse supply shock change the longrun results of the shock?

Correct Answer
verified
If a central bank accommodates an advers...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Both the long-run and the shor...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified