Question 1

Refer to The Economy in 2008. The short-run effects of rising world commodity prices 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) None of the above
F) All of the above

Question 2

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. Curve 2 is the

Accepted Answer

A)  long-run Phillips curve.
B)  short-run Phillips curve.
C)  long-run aggregate demand curve.
D)  short-run aggregate demand curve.E) C) and D)
F) A) and D)

Question 3

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Accepted Answer

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

Question 4

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

Question 5

Figure 35-5 
-Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

Accepted Answer

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

Question 6

Contractionary monetary policy

Accepted Answer

A)  leads to disinflation and makes the short-run Phillips curve shift right.
B)  leads to disinflation and makes the short-run Phillips curve shift left.
C)  does not lead to disinflation but makes the short-run Phillips curve shift right.
D)  does not lead to disinflation but makes the short-run Phillips curve shift left.E) A) and B)
F) All of the above

Question 7

U.S. net exports fall due to recessions in foreign countries.
A. According to the aggregate demand and supply model, what happens to the price level and output in the short run?
B. According to the short-run Phillips curve what happens to inflation and unemployment in the short run?
C. If the Fed wanted to reverse the effects of this shock on output, what should it do?

Accepted Answer

A. The price level and output ...

Question 8

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Accepted Answer

A)  the long run and the short run.
B)  the long run but not the short run.
C)  the short run but not the long run.
D)  neither the short run nor the long run.E) A) and B)
F) A) and C)

Question 9

Disinflation would eventually cause

Accepted Answer

A)  the short-run and the long run Phillips curve to shift right.
B)  the short-run and the long run Phillips curve to shift left.
C)  the short-run Phillips curve but not the long run Phillips curve to shift right.
D)  the short-run Phillips curve but not the long run Phillips curve to shift left.E) A) and D)
F) None of the above

Question 10

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Accepted Answer

fall. Eventually inflation exp...

Question 11

France has a higher natural rate of unemployment than the United States. This suggests that

Accepted Answer

A)  France is at a higher point on its long-run Phillips curve and so has higher inflation than the United States.
B)  France is at a lower point on its long-run Phillips curve and so has lower inflation than the United States.
C)  France's Phillips curve is to the left of that of the United States, possibly because they have higher inflation.
D)  France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.E) None of the above
F) C) and D)

Question 12

One way to express the classical idea of monetary neutrality is to draw

Accepted Answer

A)  a downward-sloping short-run Phillips curve.
B)  an upward-sloping short-run Phillips curve.
C)  a downward-sloping long-run Phillips curve.
D)  a vertical long-run Phillips curve.E) B) and C)
F) C) and D)

Question 13

Which of the following describes the Volcker disinflation most accurately?

Accepted Answer

A)  Almost all of the public believed that the Fed would keep money growth low, so unemployment rose less than it would have otherwise.
B)  Almost all of the public believed that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.
C)  Much of the public did not believe that the Fed would keep money growth low, so unemployment rose less than it would have otherwise.
D)  Much of the public did not believe that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.E) B) and C)
F) A) and D)

Question 14

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Accepted Answer

A)  higher unemployment and lower inflation
B)  lower unemployment and higher inflation
C)  higher unemployment and the same level of inflation
D)  lower unemployment and the same level of inflationE) All of the above
F) A) and C)

Question 15

Suppose that a drought significantly reduces agricultural production one year. In addition, suppose the Fed accommodates this supply shock by implementing an expansionary monetary policy. Which of the following would you expect to occur as a result of these changes?

Accepted Answer

A)  The short-run aggregate supply curve will shift to the right, the short-run Phillips Curve will shift to the left, and the accommodating monetary policy will raise inflation while lowering unemployment.
B)  The short-run aggregate supply curve will shift to the right, the short-run Phillips Curve will shift to the left, and the accommodating monetary policy will increase unemployment while lowering inflation.
C)  The short-run aggregate supply curve will shift to the left, the short-run Phillips Curve will shift to the right, and the accommodating monetary policy will raise inflation while lowering unemployment.
D)  The short-run aggregate supply curve will shift to the left, the short-run Phillips Curve will shift to the right, and the accommodating monetary policy will increase unemployment while lowering inflation.E) B) and C)
F) All of the above

Question 16

The long-run response to a decrease in the money supply growth rate is shown by shifting

Accepted Answer

A)  the short-run and long-run Phillips curves left.
B)  the short-run and long-run Phillips curves right.
C)  only the short-run Phillips curve left.
D)  only the short-run Phillips curve right.E) None of the above
F) C) and D)

Question 17

Friedman and Phelps concluded that

Accepted Answer

A)  in the long run the Phillips curve is downward sloping, which is consistent with classical theory.
B)  in the long run the Philips curve is downward sloping, which is inconsistent with classical theory.
C)  in the long run the Phillips curve is vertical, which is consistent with classical theory.
D)  in the long run the Phillips curve is vertical, which is inconsistent with classical theory.E) None of the above
F) B) and C)

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

Question 19

Friedman and Phelps believed that the natural rate of unemployment was constant.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following increases inflation and reduces unemployment in the short run?

Accepted Answer

A)  either an increase in government expenditures by itself or an increase in the money supply growth rate by itself
B)  an increase in government expenditures, but not an increase in the money supply growth rate
C)  an increase in the money supply growth rate, but not an increase in government expenditures
D)  neither an increase in government expenditures nor an increase in the money supplyE) A) and B)
F) A) and C)

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

Contractionary monetary policy

Correct Answer
verified

Which of the following increases inflation and reduces unemployment in the short run?

Correct Answer
verified

Figure 35-5 -Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

Correct Answer
verified

Which of the following describes the Volcker disinflation most accurately?

Correct Answer
verified

One way to express the classical idea of monetary neutrality is to draw

Correct Answer
verified

Suppose that a drought significantly reduces agricultural production one year. In addition, suppose the Fed accommodates this supply shock by implementing an expansionary monetary policy. Which of the following would you expect to occur as a result of these changes?

Correct Answer
verified

Refer to The Economy in 2008. The short-run effects of rising world commodity prices are shown by

Correct Answer
verified

Samuelson and Solow argued that

Correct Answer
verified

Friedman and Phelps believed that the natural rate of unemployment was constant.

Correct Answer
verified

Disinflation would eventually cause

Correct Answer
verified

The long-run response to a decrease in the money supply growth rate is shown by shifting

Correct Answer
verified

Correct Answer
verified
A. The price level and output ...
View Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. Curve 2 is the

Correct Answer
verified

France has a higher natural rate of unemployment than the United States. This suggests that

Correct Answer
verified

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Correct Answer
verified
fall. Eventually inflation exp...
View Answer

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Correct Answer
verified

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Correct Answer
verified

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Correct Answer
verified

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Correct Answer
verified

Friedman and Phelps concluded that

Correct Answer
verified

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

Contractionary monetary policy

Correct AnswerverifiedShow Answer

Which of the following increases inflation and reduces unemployment in the short run?

Correct AnswerverifiedShow Answer

Figure 35-5 -Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

Correct AnswerverifiedShow Answer

Which of the following describes the Volcker disinflation most accurately?

Correct AnswerverifiedShow Answer

One way to express the classical idea of monetary neutrality is to draw

Correct AnswerverifiedShow Answer

Suppose that a drought significantly reduces agricultural production one year. In addition, suppose the Fed accommodates this supply shock by implementing an expansionary monetary policy. Which of the following would you expect to occur as a result of these changes?

Correct AnswerverifiedShow Answer

Refer to The Economy in 2008. The short-run effects of rising world commodity prices are shown by

Correct AnswerverifiedShow Answer

Samuelson and Solow argued that

Correct AnswerverifiedShow Answer

Friedman and Phelps believed that the natural rate of unemployment was constant.

Correct AnswerverifiedShow Answer

Disinflation would eventually cause

Correct AnswerverifiedShow Answer

The long-run response to a decrease in the money supply growth rate is shown by shifting

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. The price level and output ...View AnswerShow Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. Curve 2 is the

Correct AnswerverifiedShow Answer

France has a higher natural rate of unemployment than the United States. This suggests that

Correct AnswerverifiedShow Answer

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Correct Answerverifiedfall. Eventually inflation exp...View AnswerShow Answer

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Correct AnswerverifiedShow Answer

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Correct AnswerverifiedShow Answer

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Correct AnswerverifiedShow Answer

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Correct AnswerverifiedShow Answer

Friedman and Phelps concluded that

Correct AnswerverifiedShow Answer

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A. The price level and output ...
View Answer

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fall. Eventually inflation exp...
View Answer

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