Question 1

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Accepted Answer

A)   negative correlation between the rate of unemployment and the rate of inflation.
B)   positive correlation between the rate of unemployment and the rate of inflation.
C)   negative correlation between the rate of unemployment and the rate of interest.
D)   positive correlation between the rate of unemployment and the rate of interestE) A) and B)
F) A) and C)

Question 2

An adverse supply shock causes output to

Accepted Answer

A)   rise. To counter this a central bank would increase the money supply.
B)   rise. To counter this a central bank would decrease the money supply.
C)   fall. To counter this a central bank would increase the money supply.
D)   fall. To counter this a central bank would decrease the money supply.E) A) and C)
F) A) and B)

Question 3

As the aggregate demand curve shifts to the right, what happens to the price level and output? What do these changes imply happens to the inflation rate and the unemployment rate?

Accepted Answer

The price level and output ris...

Question 4

In the 1970s, the Fed accommodated an)

Accepted Answer

A)   adverse supply shock and so contributed to higher inflation.
B)   adverse supply shock and so contributed to lower inflation.
C)   favorable supply shock and so contributed to higher inflation.
D)   favorable supply shock and so contributed to lower inflation.E) All of the above
F) A) and B)

Question 5

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Accepted Answer

A)   higher unemployment and lower output.
B)   higher unemployment and higher output.
C)   lower unemployment and lower output.
D)   lower unemployment and higher output.E) A) and D)
F) B) and D)

Question 6

The very low inflation that the U.S. experienced in 2009 and 2010

Accepted Answer

A)   appears to have reduced expected inflation, and the short-run Phillips curve shifted downward as a result.
B)   appears to have reduced expected inflation, and the short-run Phillips curve shifted upward as a result.
C)   does not appear to have reduced expected inflation, and the short-run Phillips curve remained relatively stable as a result.
D)   does not appear to have reduced expected inflation, but the short-run Phillips curve shifted dramatically nevertheless.E) C) and D)
F) None of the above

Question 7

If the unemployment rate is below the natural rate, then

Accepted Answer

A)   inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right.
B)   inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left.
C)   inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left.
D)   inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right.E) A) and B)
F) A) and C)

Question 8

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Accepted Answer

A)   Unemployment Rate = Natural Rate of Unemployment - aActual Inflation - Expected Inflation) .
B)   Unemployment Rate = Natural Rate of Unemployment - aExpected Inflation - Actual Inflation) .
C)   Unemployment Rate = Expected Rate of Inflation - aActual Inflation - Expected Inflation) .
D)   Unemployment Rate = Actual Rate of Inflation - aActual Unemployment - Expected Unemployment) .E) A) and B)
F) All of the above

Question 9

Figure 35-1. 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 35-1. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left- hand graph. Then it is apparent that the price index equaled

Accepted Answer

A)   130 in 2011.
B)   115 in 2011.
C)   110 in 2011.
D)   100 in 2011.E) B) and D)
F) A) and D)

Question 10

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Accepted Answer

A steeper Phillips c...

Question 11

Figure 35-3. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD)  curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 35-3. Assume the figure depicts possible outcomes for the year 2018. In 2018, the economy is at point A on the left-hand graph, which corresponds to point A on the right-hand graph. The price level in the year 2017 was

Accepted Answer

A)   144.
B)   150.
C)   152.
D)   156.E) A) and B)
F) B) and C)

Question 12

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 13

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Accepted Answer

Friedman and Phelps predicted that, over...

Question 14

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Accepted Answer

A)   decreased the money supply.
B)   increased government expenditures.
C)   decreased taxes.
D)   None of the above is correct.E) A) and D)
F) None of the above

Question 15

In the long run, if the Fed increases the growth rate of the money supply,

Accepted Answer

A)   inflation will be higher.
B)   unemployment will be lower.
C)   real GDP will be higher.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 16

In the long run, which of the following depends primarily on the growth rate of the money supply?

Accepted Answer

A)   the natural rate of unemployment and the inflation rate
B)   the natural rate of unemployment but not the inflation rate
C)   the inflation rate but not the natural rate of unemployment
D)   neither the natural rate of unemployment nor the inflation rateE) A) and B)
F) B) and C)

Question 17

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A)   the short-run Phillips curve shifts left
B)   unemployment falls
C)   the price level rises
D)   output rises.E) C) and D)
F) B) and C)

Question 18

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 19

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Accepted Answer

A)   0.
B)   1.
C)   4.
D)   5.E) All of the above
F) B) and D)

Question 20

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

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

If the unemployment rate is below the natural rate, then

Correct Answer
verified

As the aggregate demand curve shifts to the right, what happens to the price level and output? What do these changes imply happens to the inflation rate and the unemployment rate?

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

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Correct Answer
verified

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Correct Answer
verified

Which of the following would not be associated with a favorable supply shock?

Correct Answer
verified

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Correct Answer
verified

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Correct Answer
verified
A steeper Phillips c...
View 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 Answer
verified

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

In the long run, which of the following depends primarily on the growth rate of the money supply?

Correct Answer
verified

In the long run, if the Fed increases the growth rate of the money supply,

Correct Answer
verified

Correct Answer
verified

An adverse supply shock causes output to

Correct Answer
verified

Correct Answer
verified

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Correct Answer
verified

In the 1970s, the Fed accommodated an)

Correct Answer
verified

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Correct Answer
verified

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Correct Answer
verified
Friedman and Phelps predicted that, over...
View Answer

The very low inflation that the U.S. experienced in 2009 and 2010

Correct Answer
verified

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Correct Answer
verified

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

If the unemployment rate is below the natural rate, then

Correct AnswerverifiedShow Answer

As the aggregate demand curve shifts to the right, what happens to the price level and output? What do these changes imply happens to the inflation rate and the unemployment rate?

Correct AnswerverifiedThe price level and output ris...View AnswerShow Answer

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Correct AnswerverifiedShow Answer

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Correct AnswerverifiedShow Answer

Which of the following would not be associated with a favorable supply shock?

Correct AnswerverifiedShow Answer

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Correct AnswerverifiedShow Answer

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Correct AnswerverifiedA steeper Phillips c...View AnswerShow 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

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

In the long run, which of the following depends primarily on the growth rate of the money supply?

Correct AnswerverifiedShow Answer

In the long run, if the Fed increases the growth rate of the money supply,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An adverse supply shock causes output to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has

Correct AnswerverifiedShow Answer

In the 1970s, the Fed accommodated an)

Correct AnswerverifiedShow Answer

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Correct AnswerverifiedShow Answer

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Correct AnswerverifiedFriedman and Phelps predicted that, over...View AnswerShow Answer

The very low inflation that the U.S. experienced in 2009 and 2010

Correct AnswerverifiedShow Answer

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Correct AnswerverifiedShow Answer

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The price level and output ris...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A steeper Phillips c...
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Correct Answer
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A. The price level and output ...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Friedman and Phelps predicted that, over...
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Correct Answer
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Correct Answer
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