Question 1

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 B)
F) A) and C)

Question 2

A.W. Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Accepted Answer

A)   could not be extended to other countries, despite many researchers' attempts to provide that extension.
B)   was quickly extended to other countries by researchers.
C)   was extended to only one other country - the United States.
D)   was harshly criticized by the American economists Paul Samuelson and Robert Solow on the grounds that Phillips's study was fundamentally flawed.E) A) and C)
F) B) and C)

Question 3

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Accepted Answer

A)   the natural rate of unemployment and monetary growth.
B)   the natural rate of unemployment, but not monetary growth.
C)   monetary growth, but not the natural rate of unemployment.
D)   neither monetary growth nor the natural rate of unemployment.E) None of the above
F) A) and C)

Question 4

In the long run, if the Fed decreases the rate at which it increases the money supply,

Accepted Answer

A)   inflation and unemployment will be higher.
B)   inflation will be higher and unemployment will be lower.
C)   inflation will be lower and unemployment will be higher.
D)   None of the above is correct.E) A) and D)
F) B) and C)

Question 5

A favorable supply shock will cause inflation to

Accepted Answer

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

Question 6

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Accepted Answer

It returns...

Question 7

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Accepted Answer

A)   above its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment.
B)   above its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.
C)   below its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment.
D)   below its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.E) C) and D)
F) B) and D)

Question 8

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Accepted Answer

A)   rises. As inflation expectations adjust, the short-run Phillips curve shifts right.
B)   rises. As inflation expectations adjust, the short-run Phillips curve shifts left.
C)   falls. As inflation expectations adjust, the short-run Phillips curve shifts right.
D)   falls. As inflation expectations adjust, the short-run Phillips curve shifts left.E) B) and D)
F) A) and B)

Question 9

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)   unemployment and inflation are higher.
B)   unemployment and inflation are lower.
C)   unemployment is higher and inflation is lower.
D)   unemployment is lower and inflation is higher.E) All of the above
F) None of the above

Question 10

The short-run Phillips curve intersects the long-run Phillips curve where

Accepted Answer

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

Question 11

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Accepted Answer

A)   unemployment will be higher
B)   unemployment will be lower
C)   inflation will be higher
D)   inflation will be lowerE) B) and C)
F) C) and D)

Question 12

If policymakers decrease aggregate demand, then in the short run the price level

Accepted Answer

A)   falls and unemployment rises.
B)   and unemployment fall.
C)   and unemployment rise.
D)   rises and unemployment falls.E) B) and D)
F) B) and C)

Question 13

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 Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%, then

Accepted Answer

A)   unemployment falls but it would have fallen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%.
B)   unemployment falls but it would have fallen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%.
C)   unemployment rises but it would have risen by more if the Bank of Mokania had reduced inflation to 5% rather than 3%.
D)   unemployment rises but it would have risen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%.E) B) and D)
F) B) and C)

Question 14

Figure 35-7
Use the two graphs in the diagram to answer the following questions.
  
-Refer to Figure 35-7. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Accepted Answer

A)   A and 1.
B)   B and 2.
C)   back to C and 3.
D)   D and 4.E) A) and B)
F) C) and D)

Question 15

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 16

The natural rate of unemployment

Accepted Answer

A)   is constant over time.
B)   varies over time, but can't be changed by the government.
C)   is the unemployment rate that the economy tends to move to in the long run.
D)   depends on the rate at which the Fed increases the money supply.E) All of the above
F) A) and B)

Question 17

An increase in expected inflation shifts

Accepted Answer

A)   the long-run Phillips curve right.
B)   the short-run Phillips curve right.
C)   neither the short-run nor long-run Phillips curve right.
D)   both the short-run and long-run Phillips curve right.E) B) and D)
F) All of the above

Question 18

Which of the following shifts the long-run Phillips curve left?

Accepted Answer

A)   both an increase in the inflation rate and a decrease in the minimum wage rate
B)   an increase in the inflation rate, but not a decrease in the minimum wage rate
C)   a decrease in the minimum wage rate, but not an increase in the inflation rate
D)   neither a decrease in the minimum wage rate nor an increase in the inflation rateE) B) and C)
F) B) and D)

Question 19

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Accepted Answer

The sacrifice ratio will be smaller beca...

Question 20

If the central bank decreases the money supply, then in the short run prices

Accepted Answer

A)   rise and unemployment falls.
B)   fall and unemployment rises.
C)   and unemployment rise.
D)   and unemployment fall.E) A) and B)
F) B) and D)

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

Which of the following shifts the long-run Phillips curve left?

Correct Answer
verified

The natural rate of unemployment

Correct Answer
verified

A.W. Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Correct Answer
verified

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct Answer
verified

The short-run Phillips curve intersects the long-run Phillips curve where

Correct Answer
verified

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Correct Answer
verified
It returns...
View Answer

A favorable supply shock will cause inflation to

Correct Answer
verified

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Correct Answer
verified

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Correct Answer
verified

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct Answer
verified

If the central bank decreases the money supply, then in the short run prices

Correct Answer
verified

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

Correct Answer
verified

An increase in expected inflation shifts

Correct Answer
verified

In the long run, if the Fed decreases the rate at which it increases the money supply,

Correct Answer
verified

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct Answer
verified

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Correct Answer
verified
The sacrifice ratio will be smaller beca...
View Answer

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct Answer
verified

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Correct Answer
verified

If policymakers decrease aggregate demand, then in the short run the price level

Correct Answer
verified

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

Which of the following shifts the long-run Phillips curve left?

Correct AnswerverifiedShow Answer

The natural rate of unemployment

Correct AnswerverifiedShow Answer

A.W. Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom

Correct AnswerverifiedShow Answer

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct AnswerverifiedShow Answer

The short-run Phillips curve intersects the long-run Phillips curve where

Correct AnswerverifiedShow Answer

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Correct AnswerverifiedIt returns...View AnswerShow Answer

A favorable supply shock will cause inflation to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Correct AnswerverifiedShow Answer

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct AnswerverifiedShow Answer

If the central bank decreases the money supply, then in the short run prices

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts

Correct AnswerverifiedShow Answer

In the long run, if the Fed decreases the rate at which it increases the money supply,

Correct AnswerverifiedShow Answer

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct AnswerverifiedShow Answer

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Correct AnswerverifiedThe sacrifice ratio will be smaller beca...View AnswerShow Answer

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct AnswerverifiedShow Answer

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Correct AnswerverifiedShow Answer

If policymakers decrease aggregate demand, then in the short run the price level

Correct AnswerverifiedShow Answer

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It returns...
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The sacrifice ratio will be smaller beca...
View Answer

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