Question 1

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.E) A) and B)
F) A) and C)

Question 2

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Accepted Answer

A)   both the price level and output
B)   the price level but not output
C)   output but not the price level
D)   neither output nor the price levelE) A) and B)
F) A) and C)

Question 3

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 4

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Accepted Answer

A)   short run, and the natural rate is the socially optimal rate of unemployment.
B)   long run, and the natural rate is the socially optimal rate of unemployment.
C)   short run, and the natural rate is not necessarily the socially optimal rate of unemployment.
D)   long run, and the natural rate is not necessarily the socially optimal rate of unemployment.E) B) and C)
F) None of the above

Question 5

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

Accepted Answer

A) True 
 B)False

Question 6

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 7

Refer to Figure 35-4. What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A)   the interest rate
B)   the price level
C)   the government's budget deficit as a percent of GDP
D)   the unemployment rateE) A) and D)
F) A) and C)

Question 8

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Accepted Answer

A)   established a lot of credibility in its commitment to keep inflation at about 2 percent.
B)   established a lot of credibility in its commitment to keep inflation at about 5 percent.
C)   failed to establish significant credibility in its announced intent to keep inflation at about 2 percent.
D)   failed to establish significant credibility in its announced intent to keep inflation at about 5 percent.E) B) and D)
F) A) and B)

Question 9

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) C) and D)
F) B) and D)

Question 10

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

Question 11

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Accepted Answer

A) True 
 B)False

Question 12

Suppose expected inflation and actual inflation are both relatively high, and unemployment is at its natural rate. If the Fed then pursues a contractionary monetary policy, which of the following results would be expected in the short run?

Accepted Answer

A)   Expected inflation would exceed actual inflation, and unemployment would exceed its natural rate.
B)   Expected inflation would exceed actual inflation, and unemployment would be below its natural rate.
C)   Actual inflation would exceed expected inflation, and unemployment would exceed its natural rate.
D)   Actual inflation would exceed expected inflation, and unemployment would be below its natural rate.E) B) and C)
F) B) and D)

Question 13

A decrease in expected inflation shifts

Accepted Answer

A)   the long-run Phillips curve left.
B)   the short-run Phillips curve left.
C)   neither the short-run nor long-run Phillips curve left.
D)   both the short-run and long-run Phillips curve left.E) A) and D)
F) A) and B)

Question 14

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Accepted Answer

A)   Bureau of the Budget.
B)   Bureau of Labor Statistics.
C)   Department of the Treasury.
D)   President's Council of Economic Advisors.E) C) and D)
F) None of the above

Question 15

A central bank that accommodates an aggregate supply shock

Accepted Answer

A)   increases the money supply, making the inflation rate rise.
B)   increases the money supply, making the inflation rate fall.
C)   decreases the money supply, making the inflation rate rise.
D)   decreases the money supply, making the inflation rate fall.E) B) and C)
F) All of the above

Question 16

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Accepted Answer

A) True 
 B)False

Question 17

In 1980, the combination of inflation and unemployment the U.S. was experiencing

Accepted Answer

A)   resulted from a leftward shift of the short-run Phillips curve.
B)   was consistent with feasible inflation-unemployment combinations provided by the Phillips curve of the 1960s.
C)   followed two supply shocks that were triggered by the Organization of Petroleum Exporting Countries.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 18

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, an increase in taxes moves the economy to

Accepted Answer

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

Question 19

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the Economy in 2008. In the short-run the housing and financial crises

Accepted Answer

A)   raised both the price level and output.
B)   raised the price level and reduced output.
C)   reduced the price level and raised output.
D)   reduced both the price level and output.E) All of the above
F) A) and B)

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

A decrease in expected inflation shifts

Correct AnswerverifiedShow 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, an increase in taxes moves the economy to

Correct AnswerverifiedShow Answer

A central bank that accommodates an aggregate supply shock

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

There is a

Correct AnswerverifiedShow Answer

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Correct AnswerverifiedShow Answer

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Correct AnswerverifiedShow Answer

Suppose expected inflation and actual inflation are both relatively high, and unemployment is at its natural rate. If the Fed then pursues a contractionary monetary policy, which of the following results would be expected in the short run?

Correct AnswerverifiedShow Answer

Refer to Figure 35-4. What is measured along the horizontal axis of the right-hand graph?

Correct AnswerverifiedShow Answer

Refer to the Economy in 2008. In the short-run the housing and financial crises

Correct AnswerverifiedShow Answer

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Correct AnswerverifiedShow Answer

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Correct AnswerverifiedShow Answer

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Correct AnswerverifiedShow Answer

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

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

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

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Correct AnswerverifiedShow Answer

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

Correct AnswerverifiedShow Answer

In 1980, the combination of inflation and unemployment the U.S. was experiencing

Correct AnswerverifiedShow Answer

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified