Question 1

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Accepted Answer

A)   the short-run and the long run Phillips curves
B)   the short-run but not the long run Phillips curve
C)   the long-run but not the short-run Phillips curve
D)   neither the short-run nor the long-run Phillips curvesE) All of the above
F) A) and C)

Question 2

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

Accepted Answer

A)   the short-run Phillips curve shifts right.
B)   the short-run Phillips curve shifts left.
C)   the long-run Phillips curve shifts right.
D)   the long-run Phillips curve shifts left.E) B) and D)
F) B) and C)

Question 3

The monetary-policy framework called inflation targeting is used explicitly by

Accepted Answer

A)   no major country.
B)   most major countries except the United States and Japan.
C)   the United States, but it is not used by other major countries.
D)   most major countries, including the United States and Japan.E) A) and D)
F) A) and B)

Question 4

Figure 17-1. 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 17-1. 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) All of the above
F) B) and D)

Question 5

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Accepted Answer

A) True 
 B)False

Question 6

If people anticipate higher inflation, but inflation remains the same then

Accepted Answer

A)   the short-run Phillips curve would shift right and unemployment would rise.
B)   the short-run Phillips curve would shift right and unemployment would fall.
C)   the short-run Phillips curve would shift left and unemployment would rise.
D)   the short-run Phillips curve would shift left and unemployment would fall.E) None of the above
F) A) and C)

Question 7

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Accepted Answer

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

Question 8

Which of the following is an example of an adverse supply shock?

Accepted Answer

A)   a decrease in the money supply
B)   a tax cut
C)   a worldwide drought
D)   decreased government spendingE) A) and B)
F) A) and C)

Question 9

According to the Phillips curve, unemployment and inflation are positively related in

Accepted Answer

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

Question 10

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

Question 11

Which of the following would cause the price level to rise and output to fall in the short run?

Accepted Answer

A)   an increase in the money supply
B)   a decrease in the money supply
C)   an adverse supply shock
D)   a favorable supply shockE) C) and D)
F) A) and B)

Question 12

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Accepted Answer

A)   Inflation expectations rise which shifts the short-run Phillips curve to the right.
B)   Inflation expectations rise which shifts the short-run Phillips curve to the left.
C)   Inflation expectations fall which shifts the short-run Phillips curve to the right.
D)   Inflation expectations fall which shifts the short-run Phillips curve to the left.E) B) and D)
F) A) and D)

Question 13

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following leads to a lower level of unemployment in the long run?

Accepted Answer

A)   both an increase in the size of the money supply and an increase in the money supply growth rate
B)   an increase in the size of the money supply but not an increase in the money supply growth rate
C)   an increase in the money supply growth rate, but not an increase in the size of the money supply
D)   neither an increase in the size of the money supply nor an increase in the money supply growth rateE) B) and C)
F) A) and D)

Question 15

Figure 17-8. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."
 1 to AS2 A)  results in a more favorable trade-off between inflation and unemployment. B)  results in a more favorable trade-off between inflation and the growth rate of real GDP. C)  represents an adverse shock to aggregate supply. D)  represents a favorable shock to aggregate supply. " class="answers-bank-image d-inline" rel="preload" > 1 to AS2 A)  results in a more favorable trade-off between inflation and unemployment. B)  results in a more favorable trade-off between inflation and the growth rate of real GDP. C)  represents an adverse shock to aggregate supply. D)  represents a favorable shock to aggregate supply. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-8. The shift of the aggregate-supply curve from AS1 to AS2

Accepted Answer

A)   results in a more favorable trade-off between inflation and unemployment.
B)   results in a more favorable trade-off between inflation and the growth rate of real GDP.
C)   represents an adverse shock to aggregate supply.
D)   represents a favorable shock to aggregate supply.E) A) and B)
F) All of the above

Question 16

In the long run, an increase in the money supply

Accepted Answer

A)   leaves prices and unemployment unchanged.
B)   raises prices and unemployment.
C)   raises prices and leaves unemployment unchanged.
D)   leaves prices unchanged and reduces unemployment.E) A) and B)
F) C) and D)

Question 17

Figure 17-8. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."
  
-Refer to Figure 17-8. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Accepted Answer

A)   the outcome of a favorable supply shock.
B)   falling inflation.
C)   stagflation.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 18

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Accepted Answer

A)   reduced inflation and unemployment.
B)   raised inflation and unemployment.
C)   reduce inflation and raised unemployment.
D)   raised inflation and reduced unemployment.E) None of the above
F) All of the above

Question 19

Phillips found a negative relation between

Accepted Answer

A)   output and unemployment.
B)   output and employment.
C)   wage inflation and unemployment.
D)   None of the above is correct.E) B) and D)
F) C) and D)

Question 20

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Accepted Answer

A)   both the unemployment rate and the inflation rate would be higher.
B)   both the unemployment rate and the inflation rate would be lower.
C)   the unemployment rate would be higher and the inflation rate would be lower.
D)   the unemployment rate would be lower and the inflation rate would be higher.E) A) and B)
F) A) and C)

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

Correct Answer
verified

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

Correct Answer
verified

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct Answer
verified

Which of the following is an example of an adverse supply shock?

Correct Answer
verified

If people anticipate higher inflation, but inflation remains the same then

Correct Answer
verified

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Correct Answer
verified

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Correct Answer
verified

In the long run, an increase in the money supply

Correct Answer
verified

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Correct Answer
verified

According to the Phillips curve, unemployment and inflation are positively related in

Correct Answer
verified

Phillips found a negative relation between

Correct Answer
verified

Figure 17-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 17-8. The shift of the aggregate-supply curve from AS₁ to AS₂

Correct Answer
verified

Which of the following would cause the price level to rise and output to fall in the short run?

Correct Answer
verified

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Correct Answer
verified

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Correct Answer
verified

Which of the following leads to a lower level of unemployment in the long run?

Correct Answer
verified

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The monetary-policy framework called inflation targeting is used explicitly by

Correct Answer
verified

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct AnswerverifiedShow Answer

Which of the following is an example of an adverse supply shock?

Correct AnswerverifiedShow Answer

If people anticipate higher inflation, but inflation remains the same then

Correct AnswerverifiedShow Answer

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Correct AnswerverifiedShow Answer

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Correct AnswerverifiedShow Answer

In the long run, an increase in the money supply

Correct AnswerverifiedShow Answer

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Correct AnswerverifiedShow Answer

According to the Phillips curve, unemployment and inflation are positively related in

Correct AnswerverifiedShow Answer

Phillips found a negative relation between

Correct AnswerverifiedShow Answer

Figure 17-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 17-8. The shift of the aggregate-supply curve from AS1 to AS2

Correct AnswerverifiedShow Answer

Which of the following would cause the price level to rise and output to fall in the short run?

Correct AnswerverifiedShow Answer

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Correct AnswerverifiedShow Answer

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Correct AnswerverifiedShow Answer

Which of the following leads to a lower level of unemployment in the long run?

Correct AnswerverifiedShow Answer

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The monetary-policy framework called inflation targeting is used explicitly by

Correct AnswerverifiedShow Answer

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Figure 17-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 17-8. The shift of the aggregate-supply curve from AS₁ to AS₂

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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