Question 1

According to the short-run Phillips curve,inflation

Accepted Answer

A)   and unemployment would fall if the policymakers decreased the money supply.
B)   would fall and unemployment would rise if policymakers decreased the money supply.
C)   and unemployment would fall if the policymakers increased the money supply.
D)   would fall and unemployment would rise if policymakers increased the money supply.

Question 2

If unemployment is below its natural rate,what happens to move the economy to long-run equilibrium?

Accepted Answer

A)   Inflation expectations rise which shifts the short-run Phillips curve to the right.
B)   Inflation expectations rise which shifts the short-run Phillips curve to the left.
C)   Inflation expectations fall which shifts the short-run Phillips curve to the right.
D)   Inflation expectations fall which shifts the short-run Phillips curve to the left.

Question 3

In his famous article published in an economics journal in 1958,A.W.Phillips

Accepted Answer

A)   used data for the United States to show a negative relationship between the rate of change of the U.S.consumer price index and the U.S.unemployment rate.
B)   used data for the United States to show a negative relationship between the rate of change of wages in the U.S.and the U.S.unemployment rate.
C)   used data for the United Kingdom to show a negative relationship between the rate of change of the U.K.consumer price index and the U.K.unemployment rate.
D)   used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K.and the U.K.unemployment rate.

Question 4

Samuelson and Solow argued that when unemployment is high,

Accepted Answer

A)   aggregate demand is high,which puts upward pressure on wages and prices.
B)   aggregate demand is high,which puts downward pressure on wages and prices.
C)   aggregate demand is low,which puts upward pressure on wages and prices.
D)   aggregate demand is low,which puts downward pressure on wages and prices.

Question 5

Samuelson and Solow argued that a combination of low unemployment and low inflation

Accepted Answer

A)   was impossible given the historical data as summarized by the Phillips curve.
B)   could be achieved with an "appropriate" fiscal policy.
C)   could be achieved with an "appropriate" monetary policy.
D)   could be achieved with an "appropriate" mix of monetary and fiscal policies.

Question 6

The misery index is supposed to measure the

Accepted Answer

A)   social cost of unemployment.
B)   health of the economy.
C)   lost output associated with a particular unemployment rate.
D)   short-run tradeoff between inflation and unemployment.

Question 7

A favorable supply shock causes the price level 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.

Question 8

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 A)  results in a more favorable trade-off between inflation and unemployment. B)  results in a more favorable trade-off between inflation and the growth rate of real GDP. C)  represents an adverse shock to aggregate supply. D)  represents a favorable shock to aggregate supply." class="answers-bank-image d-inline" rel="preload" > 1 to AS2 A)  results in a more favorable trade-off between inflation and unemployment. B)  results in a more favorable trade-off between inflation and the growth rate of real GDP. C)  represents an adverse shock to aggregate supply. D)  represents a favorable shock to aggregate supply." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-8.The shift of the aggregate-supply curve from AS1 to AS2

Accepted Answer

A)   results in a more favorable trade-off between inflation and unemployment.
B)   results in a more favorable trade-off between inflation and the growth rate of real GDP.
C)   represents an adverse shock to aggregate supply.
D)   represents a favorable shock to aggregate supply.

Question 9

In responding to the Phillips curve hypothesis,Friedman argued that the Fed can peg the

Accepted Answer

A)   unemployment rate.
B)   inflation rate.
C)   growth rate of real national income.
D)   All of the above are correct.

Question 10

As aggregate demand shifts right along the aggregate supply curve,

Accepted Answer

A)   inflation and unemployment are higher.
B)   inflation is higher and unemployment is lower.
C)   unemployment is higher and inflation is lower.
D)   unemployment and inflation are lower.

Question 11

A favorable supply shock will cause

Accepted Answer

A)   unemployment to rise and the short-run Phillips curve to shift right.
B)   unemployment to rise and the short-run Phillips curve to shift left.
C)   unemployment to fall and the short-run Phillips curve to shift right.
D)   unemployment to fall and the short-run Phillips curve to shift left.

Question 12

Unexpectedly high inflation reduces unemployment in the short run,but as inflation expectations adjust the unemployment rate returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 13

Figure 22-2
Use the pair of diagrams below to answer the following questions.

-Refer to Figure 22-2.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.

Question 14

In the late 1970s,proponents of rational expectations argued that

Accepted Answer

A)   the Fed should not attempt to aggressively fight inflation.
B)   the sacrifice ratio was smaller than previously thought.
C)   the short run was relatively long.
D)   None of the above is correct.

Question 15

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher in

Accepted Answer

A)   the long run and the short run.
B)   the long run but not the short run.
C)   the short run but not the long run.
D)   neither the short run nor the long run.

Question 16

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 level

Question 17

Natural rate of unemployment - a *(ctual inflation - Expected inflation) =

Accepted Answer

A)   Quantity of goods and services demanded.
B)   Quantity of goods and services supplied.
C)   Unemployment rate.
D)   Previous year's inflation rate.

Question 18

Which of the following is not associated with an adverse supply shock?

Accepted Answer

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

Question 19

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.

Question 20

If the Fed increases the growth rate of the money supply,in the long run which of the following is unchanged?

Accepted Answer

A)   the unemployment rate and inflation
B)   the unemployment rate but not inflation
C)   inflation but not the unemployment rate
D)   neither inflation nor the unemployment rate

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

Which of the following is not associated with an adverse supply shock?

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In his famous article published in an economics journal in 1958,A.W.Phillips

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Samuelson and Solow argued that a combination of low unemployment and low inflation

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According to the short-run Phillips curve,inflation

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If the Fed increases the growth rate of the money supply,in the long run which of the following is unchanged?

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Samuelson and Solow argued that when unemployment is high,

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In the late 1970s,proponents of rational expectations argued that

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Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2.If the economy starts at C and 1,then in the short run,an increase in taxes moves the economy to

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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.The shift of the aggregate-supply curve from AS1 to AS2

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Unexpectedly high inflation reduces unemployment in the short run,but as inflation expectations adjust the unemployment rate returns to its natural rate.

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A favorable supply shock will cause

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Natural rate of unemployment - a *(ctual inflation - Expected inflation) =

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If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher in

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The misery index is supposed to measure the

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In responding to the Phillips curve hypothesis,Friedman argued that the Fed can peg the

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As aggregate demand shifts right along the aggregate supply curve,

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 experience of the Volcker disinflation of the early 1980s

Correct AnswerverifiedShow Answer

If unemployment is below its natural rate,what happens to move the economy to long-run equilibrium?

Correct AnswerverifiedShow Answer

A favorable supply shock causes the price level to

Correct AnswerverifiedShow Answer

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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.The shift of the aggregate-supply curve from AS₁ to AS₂

Correct Answer
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