Question 1

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

Accepted Answer

A)  both the short-run and the long-run Phillips curves
B)  neither the short-run nor the long-run Phillips curves
C)  only the short-run Phillips curve
D)  only the long-run Phillips curveE) B) and C)
F) A) and D)

Question 2

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

Accepted Answer

The short-run Phillips curve s...

Question 3

If there is an increase in the price of oil, then

Accepted Answer

A)  unemployment rises. If the central bank tries to counter this increase, inflation rises.
B)  unemployment rises. If the central bank tries to counter this increase, inflation falls.
C)  unemployment falls. If the central bank tries to counter this decrease, inflation falls.
D)  unemployment falls. If the central bank tries to counter this decrease, inflation rises.E) A) and C)
F) A) and B)

Question 4

An adverse supply shock will cause output

Accepted Answer

A)  and prices to rise.
B)  and prices to fall.
C)  to rise and prices to fall.
D)  to fall and prices to rise.E) C) and D)
F) A) and B)

Question 5

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 6

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

Accepted Answer

It would r...

Question 7

If expected inflation increases, which of the following shifts right?

Accepted Answer

A)  both the short-run and the long-run Phillips curves
B)  the short-run but not the long-run Phillips curve
C)  the long-run but not the short-run Phillips curve
D)  neither the long-run nor the short-run Phillips curveE) B) and C)
F) A) and D)

Question 8

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Accepted Answer

A)  The change in inflation, but not the change in unemployment is consistent with what a given short-run Phillips curve implies.
B)  The change in unemployment, but not the change in inflation is consistent with what a given short-run Phillips curve implies.
C)  Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.
D)  Neither the change in inflation nor the change in unemployment are consistent with what a given short-run Phillips curve implies.E) A) and C)
F) A) and D)

Question 9

When aggregate demand shifts left along the short-run aggregate supply curve,

Accepted Answer

A)  unemployment and prices rise.
B)  unemployment rises and prices fall.
C)  unemployment falls and prices rise.
D)  unemployment and prices fall.E) A) and D)
F) None of the above

Question 10

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

As an economist working for a U.S. government agency you determine that a particular country has a sacrifice ratio of 3. Policy-makers in that country are thinking of lowering the inflation rate from 10% to 4%. Is this sacrifice ratio higher or lower than the typical estimate? From your numbers, what is the amount of output that will be lost for this country to reduce its inflation rate?

Accepted Answer

A)  The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual output to reach the new inflation target.
B)  The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual output to reach the new inflation target.
C)  The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output to reach the new inflation target.
D)  The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual output to reach the new inflation target.E) A) and D)
F) All of the above

Question 13

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A)  an increase in the natural rate of unemployment or expansionary monetary policy.
B)  expansionary monetary policy, but not an increase in the natural rate of unemployment.
C)  an increase in the natural rate of unemployment or a contractionary monetary policy.
D)  contractionary monetary policy, but not an increase in the natural rate of unemployment.E) All of the above
F) B) and C)

Question 14

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Accepted Answer

A)  downward-sloping, which implies that monetary and fiscal policies can influence the level of unemployment in the long run.
B)  downward-sloping, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.
C)  vertical, which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run.
D)  vertical, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.E) All of the above
F) A) and B)

Question 15

Which of the following is correct according to the long-run Phillips curve?

Accepted Answer

A)  No government policy, including changes in the money supply growth rate, can change the natural rate of unemployment.
B)  Changes in the money supply growth rate are the only means by which government policy can change the natural rate of unemployment.
C)  Monetary policy cannot change the natural rate of unemployment, but other government policies can.
D)  Monetary policy and other government policies can shift the long-run Phillips curve.E) All of the above
F) A) and D)

Question 16

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A)  increase the rate at which the money supply increases. This will also move inflation closer to its previous rate..
B)  increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate
C)  decrease the rate at which the money supply increases. This will also move inflation closer to its original rate
D)  decrease the rate at which the money supply increases. However, this will make higher than its previous rate.E) A) and B)
F) B) and C)

Question 17

In the long run a reduction in the money supply growth rate affects

Accepted Answer

A)  the inflation rate and the natural rate of unemployment.
B)  the inflation rate but not the natural rate of unemployment.
C)  neither the inflation rate nor the natural rate of unemployment.
D)  the natural rate of unemployment, but not the inflation rate.E) A) and B)
F) None of the above

Question 18

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Accepted Answer

A)  B.
B)  C.
C)  F.
D)  None of the above is consistent with a decrease in the money supply growth rate.E) B) and C)
F) All of the above

Question 19

In the 1970s, the Fed accommodated a(n)

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

Question 20

An increase in the natural rate of unemployment shifts the short-run Phillips curve to the _____. If the central bank sees the increase in the unemployment rate, but thinks the natural rate has remained the same and so wants to reduce unemployment, it would ________ the money supply growth rate. If it maintains this money supply growth rate, eventually the short run Phillips curve will shift _____ and unemployment will be _____.

Accepted Answer

right, increase, rig...

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Correct Answer
verified

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Correct Answer
verified

Correct Answer
verified
right, increase, rig...
View Answer

If there is an increase in the price of oil, then

Correct Answer
verified

If expected inflation increases, which of the following shifts right?

Correct Answer
verified

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Correct Answer
verified

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct Answer
verified

A movement to the right along a given short-run Phillips curve could be caused by

Correct Answer
verified

An adverse supply shock will cause output

Correct Answer
verified

When aggregate demand shifts left along the short-run aggregate supply curve,

Correct Answer
verified

In the long run a reduction in the money supply growth rate affects

Correct Answer
verified

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

Correct Answer
verified
It would r...
View Answer

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

Correct Answer
verified

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

Correct Answer
verified

In the 1970s, the Fed accommodated a(n)

Correct Answer
verified

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Correct Answer
verified

Correct Answer
verified

Which of the following is correct according to the long-run Phillips curve?

Correct Answer
verified

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Correct Answer
verified

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

Correct Answer
verified
The short-run Phillips curve s...
View Answer

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Correct AnswerverifiedShow Answer

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Correct AnswerverifiedShow Answer

Correct Answerverifiedright, increase, rig...View AnswerShow Answer

If there is an increase in the price of oil, then

Correct AnswerverifiedShow Answer

If expected inflation increases, which of the following shifts right?

Correct AnswerverifiedShow Answer

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Correct AnswerverifiedShow Answer

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct AnswerverifiedShow Answer

A movement to the right along a given short-run Phillips curve could be caused by

Correct AnswerverifiedShow Answer

An adverse supply shock will cause output

Correct AnswerverifiedShow Answer

When aggregate demand shifts left along the short-run aggregate supply curve,

Correct AnswerverifiedShow Answer

In the long run a reduction in the money supply growth rate affects

Correct AnswerverifiedShow Answer

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

Correct AnswerverifiedIt would r...View AnswerShow Answer

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the 1970s, the Fed accommodated a(n)

Correct AnswerverifiedShow Answer

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is correct according to the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Correct AnswerverifiedShow Answer

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

Correct AnswerverifiedThe short-run Phillips curve s...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
right, increase, rig...
View Answer

Correct Answer
verified

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
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It would r...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The short-run Phillips curve s...
View Answer