Question 1

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Accepted Answer

A)   If so, this might have been the result of a negative supply shock or an increase in expected inflation.
B)   If so, this might been the result of a negative supply shock, or a decrease in expected inflation.
C)   If so, this might have been the result of a positive supply shock, or an increase in expected inflation.
D)   If so, this might have been the result of a positive supply shock, or a decrease in expected inflation.E) A) and C)
F) None of the above

Question 2

The short-run Phillips curve shows the combinations of

Accepted Answer

A)   unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve.
B)   unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
C)   real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 3

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) A) and B)

Question 4

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) B) and D)
F) A) and D)

Question 5

The experience of the Volcker disinflation of the early 1980s

Accepted Answer

A)   generally increased estimates of the sacrifice ratio.
B)   generally decreased estimates of the sacrifice ratio.
C)   clearly refuted the predictions of the proponents of rational expectations.
D)   clearly refuted the predictions of the opponents of rational expectations.E) A) and B)
F) A) and C)

Question 6

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect

Accepted Answer

A)   both the unemployment rate and the inflation rate.
B)   the unemployment rate but not the inflation rate.
C)   the inflation rate but not the unemployment rate.
D)   neither the inflation rate nor the unemployment rate.E) A) and B)
F) B) and C)

Question 7

Ultimately, the change in unemployment associated with a change in inflation is due to

Accepted Answer

A)   the shape of the long-run aggregate supply curve.
B)   unanticipated inflation, not inflation per se.
C)   anticipated inflation, not inflation per se.
D)   a change in the natural rate of unemployment.E) All of the above
F) B) and C)

Question 8

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 aggregate demand moves the economy to

Accepted Answer

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

Question 9

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 10

Write the equation representing the short-run Phillips curve.

Accepted Answer

Unemployment rate = ...

Question 11

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Accepted Answer

The inflation rate r...

Question 12

Suppose the central bank pursues an unexpectedly tight monetary policy. 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 D)
F) B) and C)

Question 13

A. W. Phillips' findings were based on data

Accepted Answer

A)   from 1861-1957 for the United Kingdom.
B)   from 1861-1957 for the United States.
C)   mostly from the post-World War II period in the United Kingdom.
D)   mostly from the post-World War II period in the United States.E) B) and C)
F) A) and C)

Question 14

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

Accepted Answer

The econom...

Question 15

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Accepted Answer

A) True 
 B)False

Question 16

If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing

Accepted Answer

A)   2 percent of annual output.
B)   6 percent of annual output.
C)   8 percent of annual output.
D)   11 percent of annual output.E) All of the above
F) B) and C)

Question 17

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) , the variable a is a parameter that measures how much

Accepted Answer

A)   actual inflation responds to expected inflation.
B)   expected inflation responds to actual inflation.
C)   the natural rate of unemployment responds to unexpected inflation.
D)   actual unemployment responds to unexpected inflation.E) All of the above
F) A) and D)

Question 18

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

Question 19

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

Accepted Answer

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

Question 20

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 that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%. Then

Accepted Answer

A)   unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation.
B)   unemployment falls, but it would have fallen more if people had been expecting 25% inflation.
C)   unemployment rises, but it would have risen more if people had been expecting 12.5% inflation.
D)   unemployment rises, but it would have risen more if people had been expecting 25% inflation.E) A) and C)
F) None of the above

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

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) , the variable a is a parameter that measures how much

Correct Answer
verified

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

Correct Answer
verified

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Correct Answer
verified
The inflation rate r...
View 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 aggregate demand moves the economy to

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

If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing

Correct Answer
verified

In the long run, an increase in the money supply

Correct Answer
verified

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect

Correct Answer
verified

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

Correct Answer
verified
The econom...
View Answer

A. W. Phillips' findings were based on data

Correct Answer
verified

Ultimately, the change in unemployment associated with a change in inflation is due to

Correct Answer
verified

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 Answer
verified

Write the equation representing the short-run Phillips curve.

Correct Answer
verified
Unemployment rate = ...
View Answer

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Correct Answer
verified

Suppose the central bank pursues an unexpectedly tight monetary policy. In the short-run the effects of this are shown by

Correct Answer
verified

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Correct Answer
verified

Friedman and Phelps concluded that

Correct Answer
verified

Correct Answer
verified

The short-run Phillips curve shows the combinations of

Correct Answer
verified

The experience of the Volcker disinflation of the early 1980s

Correct Answer
verified

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

In the equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) , the variable a is a parameter that measures how much

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Correct AnswerverifiedThe inflation rate r...View AnswerShow 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 aggregate demand moves the economy to

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

If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing

Correct AnswerverifiedShow Answer

In the long run, an increase in the money supply

Correct AnswerverifiedShow Answer

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect

Correct AnswerverifiedShow Answer

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

Correct AnswerverifiedThe econom...View AnswerShow Answer

A. W. Phillips' findings were based on data

Correct AnswerverifiedShow Answer

Ultimately, the change in unemployment associated with a change in inflation is due to

Correct AnswerverifiedShow Answer

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

Write the equation representing the short-run Phillips curve.

Correct AnswerverifiedUnemployment rate = ...View AnswerShow Answer

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Correct AnswerverifiedShow Answer

Suppose the central bank pursues an unexpectedly tight monetary policy. In the short-run the effects of this are shown by

Correct AnswerverifiedShow Answer

Just as the aggregate-supply curve slopes upward only in the short run, the trade-off between inflation and unemployment holds only in the short run.

Correct AnswerverifiedShow Answer

Friedman and Phelps concluded that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short-run Phillips curve shows the combinations of

Correct AnswerverifiedShow Answer

The experience of the Volcker disinflation of the early 1980s

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The inflation rate r...
View Answer

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
The econom...
View Answer

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

Correct Answer
verified

Correct Answer
verified