Question 1

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)  expansionary fiscal policy
B)  an increase in the inflation rate
C)  increases in unemployment compensation
D)  None of the above is correct.E) A) and D)
F) C) and D)

Question 3

Friedman and Phelps argued that

Accepted Answer

A)  if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run.
B)  if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run.
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations.
D)  None of the above is correct.E) A) and C)
F) None of the above

Question 4

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Accepted Answer

A)  both the long-run aggregate supply curve and the long-run Phillips curve
B)  the long-run aggregate supply curve, but not the long-run Phillips curve
C)  the long-run Phillips curve, but not the long-run aggregate supply curve
D)  neither the long-run Phillips curve nor the long-run aggregate supply curveE) A) and B)
F) None of the above

Question 5

In the long run,

Accepted Answer

A)  the natural rate of unemployment depends primarily on the level of aggregate demand.
B)  inflation depends primarily upon the money supply growth rate.
C)  there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)  All of the above are correct.E) All of the above
F) A) and C)

Question 6

In the short run, policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level.
B)  neither unemployment nor the price level.
C)  only unemployment.
D)  only the price level.E) B) and C)
F) None of the above

Question 7

Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Southland. Suppose that the Southland 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 was very skeptical and in fact thought the Southland Department of Finance was going to raise inflation to 30% so it could increase its expenditures. Then

Accepted Answer

A)  unemployment falls, but it would have fallen less if people had been expecting 25% inflation.
B)  unemployment falls, but it would have fallen less if people had been expecting 35% inflation.
C)  unemployment rises, but it would have risen less if people had been expecting 25% inflation.
D)  unemployment rises, but it would have risen less if people had been expecting 35% inflation.E) C) and D)
F) A) and D)

Question 8

Disinflation is defined as a

Accepted Answer

A)  zero rate of inflation.
B)  constant rate of inflation.
C)  reduction in the rate of inflation.
D)  negative rate of inflation.E) A) and D)
F) B) and C)

Question 9

Figure 22-8. 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, but it could not explain the shift of the Phillips curve from PC1 to PC2. B) the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. C) both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. D) neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-8. A significant increase in the world price of oil could explain

Accepted Answer

A)  the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the shift of the Phillips curve from PC1 to PC2.
B)  the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of the aggregate-supply curve from AS1 to AS2.
C)  both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2.
D)  neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2.E) B) and D)
F) C) and D)

Question 10

A favorable 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) All of the above

Question 11

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to The Economy in 2008. In the short run the increased prices of world commodities

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

Question 12

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) A) and C)

Question 13

Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Southland. Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%. 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 less if people had been expecting 12.5% inflation.
B)  unemployment falls, but it would have fallen less if people had been expecting 25% inflation.
C)  unemployment rises, but it would have risen less if people had been expecting 12.5% inflation.
D)  unemployment rises, but it would have risen less if people had been expecting 25% inflation.E) B) and C)
F) A) and B)

Question 14

In the long run,

Accepted Answer

A)  the natural rate of unemployment depends primarily on the level of aggregate demand.
B)  inflation depends primarily upon the money supply growth rate.
C)  there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)  All of the above are correct.E) A) and D)
F) All of the above

Question 15

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Accepted Answer

A)  the long-run Phillips curve and the long-run aggregate supply curve
B)  the long-run Phillips curve but not the long-run aggregate supply curve
C)  the long-run aggregate supply curve but not the long-run Phillips curve
D)  neither the long-run Phillips curve nor the long-run aggregate supply curveE) All of the above
F) B) and C)

Question 16

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Accepted Answer

A)  it seemed to work for wages but not for inflation.
B)  monetary policy was ineffective in combating inflation.
C)  the Phillips curve did not apply in the long run.
D)  Phillips had made errors in collecting his data.E) C) and D)
F) B) and C)

Question 17

Figure 22-7
Use this graph to answer the questions below. 
-Refer to figure 22-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Accepted Answer

A)  3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
B)  3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.
C)  7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
D)  7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.E) None of the above
F) A) and C)

Question 18

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

Question 19

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) A) and D)
F) A) and C)

Question 20

Figure 22-3. 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 22-3. What is measured along the vertical axis of the left-hand graph?

Accepted Answer

A)  the wage rate
B)  the inflation rate
C)  the price level
D)  the change in output from one year to the nextE) A) and D)
F) A) and C)

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

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Correct Answer
verified

Correct Answer
verified

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct Answer
verified

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Correct Answer
verified

Which of the following would shift the long-run Phillips curve to the right?

Correct Answer
verified

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Correct Answer
verified

A favorable supply shock causes output to

Correct Answer
verified

Disinflation is defined as a

Correct Answer
verified

In the long run,

Correct Answer
verified

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. In the short run the increased prices of world commodities

Correct Answer
verified

Correct Answer
verified

In the short run, policy that changes aggregate demand changes

Correct Answer
verified

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

Correct Answer
verified

Figure 22-8. 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 22-8. A significant increase in the world price of oil could explain

Correct Answer
verified

Correct Answer
verified

In the long run,

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

Figure 22-7 Use this graph to answer the questions below. -Refer to figure 22-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Correct Answer
verified

Friedman and Phelps argued that

Correct Answer
verified

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

Correct Answer
verified

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

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct AnswerverifiedShow Answer

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Correct AnswerverifiedShow Answer

Which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Correct AnswerverifiedShow Answer

A favorable supply shock causes output to

Correct AnswerverifiedShow Answer

Disinflation is defined as a

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. In the short run the increased prices of world commodities

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the short run, policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 22-8. 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 22-8. A significant increase in the world price of oil could explain

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the long run,

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

Figure 22-7 Use this graph to answer the questions below. -Refer to figure 22-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Correct AnswerverifiedShow Answer

Friedman and Phelps argued that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified