Question 1

As people get used to inflation:

Accepted Answer

A)   the short-run aggregate demand curve adjusts more rapidly.
B)   wages adjust faster, and the short-run aggregate supply shifts quickly to the right.
C)   wages adjust faster, and the short-run aggregate supply shifts quickly to the left.
D)   the long-run aggregate demand adjusts more slowly.

Question 2

If actual output growth is 5% when potential output growth is 5%, then the unemployment rate will:

Accepted Answer

A)   not change.
B)   rise.
C)   fall.
D)   be zero.

Question 3

When an economy has high inflation:

Accepted Answer

A)   wage and price stickiness lessens or disappears.
B)   the Keynesian model of the economy is most relevant.
C)   wages become more inflexible as workers wait for prices to stabilize.
D)   changes in the money supply take much longer to affect the inflation rate.

Question 4

The inflation tax is the effect on the public of:

Accepted Answer

A)   the increase in the real value of money caused by inflation.
B)   the decrease in the real value of money caused by inflation.
C)   the result of indexing wages to inflation.
D)   cost of living adjustments.

Question 5

Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions 
Figure: Short-Run Phillips Curve 1 is based on an expected inflation rate of: A)  zero. B)  1%. C)  2%. D)  3%." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Short-Run Phillips Curve)  Look at the figure Short-Run Phillips Curve. SRPC1 is based on an expected inflation rate of:

Accepted Answer

A)   zero.
B)   1%.
C)   2%.
D)   3%.

Question 7

There is a zero bound to:

Accepted Answer

A)   the real money supply.
B)   nominal interest rates.
C)   potential output.
D)   real money demand.

Question 8

Explain why the classical model of the price level is more accurate during high inflation than low inflation.

Accepted Answer

The classical model of the price level p...

Question 9

If workers expect a lower rate of inflation, the short-run Phillips curve will:

Accepted Answer

A)   remain constant, but there will be a movement down the curve.
B)   be unaffected.
C)   shift up.
D)   shift down.

Question 10

According to the classical model of the price level, an increase in the money supply will cause _____ and _____ increase in real GDP.

Accepted Answer

A)   inflation; no long-run
B)   inflation; a long-run
C)   no inflation; a long-run
D)   deflation; no long-run

Question 11

If the natural rate of unemployment _____, the nonaccelerating inflation rate of unemployment _____, and the long-run Phillips curve shifts to the left.

Accepted Answer

A)   falls; falls
B)   rises; rises
C)   falls; rises
D)   rises; falls

Question 12

The inflation tax refers to:

Accepted Answer

A)   moving into higher tax brackets.
B)   the reduction in the real value of money when inflation falls.
C)   the reduction in the real value of money when inflation rises.
D)   the tax imposed on inflation by the government.

Question 13

The liquidity trap is associated with all of the following EXCEPT:

Accepted Answer

A)   a large reduction in the demand for loanable funds.
B)   the nominal interest rate falling to zero.
C)   monetary policy becoming ineffective.
D)   fiscal policy becoming ineffective.

Question 14

Suppose that the public expects inflation to increase from 3% to 4% this year. How will this affect the short-run Phillips curve?

Accepted Answer

If the public expects a higher inflation...

Question 15

Use the following to answer questions 
Figure: Classical Model of the Price Level 1 to AD2, according to this classical model, the SRAS will: A)  not change, since in the classical model the SRAS and LRAS are both vertical at potential output. B)  decrease from SRAS1 to SRAS2. C)  increase from SRAS2 to SRAS1. D)  increase from SRAS1 to SRAS2." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Classical Model of the Price Level)  Look at the figure Classical Model of the Price Level. If the central bank increases the money supply such that aggregate demand shifts from AD1 to AD2, according to this classical model, the SRAS will:

Accepted Answer

A)   not change, since in the classical model the SRAS and LRAS are both vertical at potential output.
B)   decrease from SRAS1 to SRAS2.
C)   increase from SRAS2 to SRAS1.
D)   increase from SRAS1 to SRAS2.

Question 16

What distinction did Zimbabwe achieve in June 2008?

Accepted Answer

A)   It was the first African nation to become a democracy.
B)   It ended apartheid.
C)   It had the world's highest inflation rate.
D)   It had the world's highest unemployment rate.

Question 17

Explain why, in the short run, the unemployment rate tends to fall when the inflation rate rises.

Accepted Answer

When aggregate demand is increasing, a s...

Question 18

If the Fed increases the monetary base by $40 billion through open-market operations:

Accepted Answer

A)   GDP will increase by $40 billion.
B)   the price level will increase by $40 billion.
C)   the U.S. government debt held by the public has been reduced by $40 billion.
D)   government spending has increased by $40 billion.

Question 19

Suppose that the natural rate of unemployment is 5% and that the economy is operating at 101% of potential output. Use Okun's law to determine the unemployment rate.

Accepted Answer

The answer of Suppose that the natural rate of unemployment...

Question 20

A Phillips curve implies a negative relationship between:

Accepted Answer

A)   consumption and saving.
B)   inflation and prices.
C)   inflation and unemployment.
D)   consumption and inflation.

Exam 28: Inflation, Disinflation, and Deflation

The liquidity trap is associated with all of the following EXCEPT:

Correct Answer
verified

Suppose that the public expects inflation to increase from 3% to 4% this year. How will this affect the short-run Phillips curve?

Correct Answer
verified
If the public expects a higher inflation...
View Answer

The inflation tax is the effect on the public of:

Correct Answer
verified

According to the classical model of the price level, an increase in the money supply will cause _ and _ increase in real GDP.

Correct Answer
verified

Explain why the classical model of the price level is more accurate during high inflation than low inflation.

Correct Answer
verified
The classical model of the price level p...
View Answer

If the natural rate of unemployment _, the nonaccelerating inflation rate of unemployment _, and the long-run Phillips curve shifts to the left.

Correct Answer
verified

As people get used to inflation:

Correct Answer
verified

Suppose that the natural rate of unemployment is 5% and that the economy is operating at 101% of potential output. Use Okun's law to determine the unemployment rate.

Correct Answer
verified

When an economy has high inflation:

Correct Answer
verified

A Phillips curve implies a negative relationship between:

Correct Answer
verified

If actual output growth is 5% when potential output growth is 5%, then the unemployment rate will:

Correct Answer
verified

The inflation tax refers to:

Correct Answer
verified

Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.

Correct Answer
verified

If the Fed increases the monetary base by $40 billion through open-market operations:

Correct Answer
verified

There is a zero bound to:

Correct Answer
verified

What distinction did Zimbabwe achieve in June 2008?

Correct Answer
verified

Use the following to answer questions Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC₁ is based on an expected inflation rate of:

Correct Answer
verified

Explain why, in the short run, the unemployment rate tends to fall when the inflation rate rises.

Correct Answer
verified
When aggregate demand is increasing, a s...
View Answer

Correct Answer
verified

If workers expect a lower rate of inflation, the short-run Phillips curve will:

Correct Answer
verified

Exam 28: Inflation, Disinflation, and Deflation

The liquidity trap is associated with all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Suppose that the public expects inflation to increase from 3% to 4% this year. How will this affect the short-run Phillips curve?

Correct AnswerverifiedIf the public expects a higher inflation...View AnswerShow Answer

The inflation tax is the effect on the public of:

Correct AnswerverifiedShow Answer

According to the classical model of the price level, an increase in the money supply will cause _____ and _____ increase in real GDP.

Correct AnswerverifiedShow Answer

Explain why the classical model of the price level is more accurate during high inflation than low inflation.

Correct AnswerverifiedThe classical model of the price level p...View AnswerShow Answer

If the natural rate of unemployment _____, the nonaccelerating inflation rate of unemployment _____, and the long-run Phillips curve shifts to the left.

Correct AnswerverifiedShow Answer

As people get used to inflation:

Correct AnswerverifiedShow Answer

Suppose that the natural rate of unemployment is 5% and that the economy is operating at 101% of potential output. Use Okun's law to determine the unemployment rate.

Correct AnswerverifiedShow Answer

When an economy has high inflation:

Correct AnswerverifiedShow Answer

A Phillips curve implies a negative relationship between:

Correct AnswerverifiedShow Answer

If actual output growth is 5% when potential output growth is 5%, then the unemployment rate will:

Correct AnswerverifiedShow Answer

The inflation tax refers to:

Correct AnswerverifiedShow Answer

Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.

Correct AnswerverifiedShow Answer

If the Fed increases the monetary base by $40 billion through open-market operations:

Correct AnswerverifiedShow Answer

There is a zero bound to:

Correct AnswerverifiedShow Answer

What distinction did Zimbabwe achieve in June 2008?

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC1 is based on an expected inflation rate of:

Correct AnswerverifiedShow Answer

Explain why, in the short run, the unemployment rate tends to fall when the inflation rate rises.

Correct AnswerverifiedWhen aggregate demand is increasing, a s...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If workers expect a lower rate of inflation, the short-run Phillips curve will:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
If the public expects a higher inflation...
View Answer

Correct Answer
verified

According to the classical model of the price level, an increase in the money supply will cause _ and _ increase in real GDP.

Correct Answer
verified

Correct Answer
verified
The classical model of the price level p...
View Answer

If the natural rate of unemployment _, the nonaccelerating inflation rate of unemployment _, and the long-run Phillips curve shifts to the left.

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

Use the following to answer questions Figure: Short-Run Phillips Curve -(Figure: Short-Run Phillips Curve) Look at the figure Short-Run Phillips Curve. SRPC₁ is based on an expected inflation rate of:

Correct Answer
verified

Correct Answer
verified
When aggregate demand is increasing, a s...
View Answer

Correct Answer
verified

Correct Answer
verified