Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

The long-run response to a decrease in the money supply growth rate is shown by shifting

Accepted Answer

A)   the short-run and long-run Phillips curves left.
B)   the short-run and long-run Phillips curves right.
C)   only the short-run Phillips curve left.
D)   only the short-run Phillips curve right.E) A) and C)
F) A) and B)

Question 4

Which of the following is vertical?

Accepted Answer

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

Question 5

If the natural rate of unemployment falls,

Accepted Answer

A)   both the short-run and long-run Phillips curves shift left.
B)   the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged.
C)   the short-run Phillips curve is unchanged, the long-run Phillips curve shifts right.
D)   the short-run and the long-run Phillips curves shift right.E) C) and D)
F) A) and B)

Question 6

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 7

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

Question 8

Figure 35-9. 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 35-9. Subsequent to the shift of the Phillips curve from PC1 to PC2, the curve will soon shift back to PC1 if people perceive the

Accepted Answer

A)   increase in the inflation rate as a temporary aberration.
B)   economic boom as a temporary aberration.
C)   increase in the inflation rate as a sign of a new era of higher inflation.
D)   economic boom as a sign of a new era of higher economic growth.E) A) and B)
F) A) and C)

Question 9

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

Accepted Answer

A)   4 percent of annual output.
B)   8 percent of annual output.
C)   12 percent of annual output.
D)   16 percent of annual output.E) All of the above
F) C) and D)

Question 10

Which of the following would cause the price level to rise and output to fall in the short run?

Accepted Answer

A)   an increase in the money supply
B)   a decrease in the money supply
C)   an adverse supply shock
D)   a favorable supply shockE) B) and C)
F) C) and D)

Question 11

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.E) A) and C)
F) B) and C)

Question 12

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Accepted Answer

A)   unemployment rises. In the long run the short-run Phillips curve shifts left.
B)   unemployment rises. In the long run the short-run Phillips curve shifts right.
C)   unemployment falls. In the long run the short-run the Phillips curve shifts left.
D)   unemployment falls. In the long run the short-run the Phillips curve shifts right.E) A) and C)
F) B) and D)

Question 13

List one specific policy that would shift the long-run Phillips curve to the right.

Accepted Answer

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Question 14

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Accepted Answer

A)   both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)   inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)   inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)   inflation is lower and unemployment is the same as it was prior to the change in policy.E) All of the above
F) B) and C)

Question 15

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

Accepted Answer

A)   raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right.
B)   raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.
C)   reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right.
D)   reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.E) C) and D)
F) A) and B)

Question 16

Which of the following describes the Volcker disinflation most accurately?

Accepted Answer

A)   Almost all of the public believed that the Fed would keep money growth low, so unemployment rose less than it would have otherwise.
B)   Almost all of the public believed that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.
C)   Much of the public did not believe that the Fed would keep money growth low, so unemployment rose less than it would have otherwise.
D)   Much of the public did not believe that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.E) C) and D)
F) All of the above

Question 17

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

A)   downward pressures on prices and wages.
B)   downward pressures on prices and upward pressures on wages.
C)   upward pressures on prices and downward pressures on wages.
D)   upward pressures on prices and wages.E) All of the above
F) None of the above

Question 18

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 19

In the long run, a decrease in the money supply growth rate

Accepted Answer

A)   reduces expected inflation so the long-run Phillips curve shifts left.
B)   reduces expected inflation so the short-run Phillips curve shifts left.
C)   Both A and B are correct.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 20

In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

Accepted Answer

A)   raised unemployment and inflation.
B)   raised unemployment and reduced inflation.
C)   reduced unemployment and raised inflation.
D)   reduced unemployment and inflation.E) A) and B)
F) A) and C)

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

Correct Answer
verified

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct Answer
verified

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Correct Answer
verified

The long-run response to a decrease in the money supply growth rate is shown by shifting

Correct Answer
verified

If the natural rate of unemployment falls,

Correct Answer
verified

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

Correct Answer
verified

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Correct Answer
verified

Which of the following would cause the price level to rise and output to fall in the short run?

Correct Answer
verified

In the short run, policy that changes aggregate demand changes

Correct Answer
verified

List one specific policy that would shift the long-run Phillips curve to the right.

Correct Answer
verified
More generous unempl...
View Answer

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Correct Answer
verified

In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

Correct Answer
verified

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

Correct Answer
verified

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 Answer
verified

Which of the following describes the Volcker disinflation most accurately?

Correct Answer
verified

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct Answer
verified

Which of the following is vertical?

Correct Answer
verified

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

Correct Answer
verified

In the long run, a decrease in the money supply growth rate

Correct Answer
verified

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

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct AnswerverifiedShow Answer

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Correct AnswerverifiedShow Answer

The long-run response to a decrease in the money supply growth rate is shown by shifting

Correct AnswerverifiedShow Answer

If the natural rate of unemployment falls,

Correct AnswerverifiedShow Answer

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

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

Which of the following would cause the price level to rise and output to fall in the short run?

Correct AnswerverifiedShow Answer

In the short run, policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

List one specific policy that would shift the long-run Phillips curve to the right.

Correct AnswerverifiedMore generous unempl...View AnswerShow Answer

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Correct AnswerverifiedShow Answer

In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

Correct AnswerverifiedShow Answer

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

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

Which of the following describes the Volcker disinflation most accurately?

Correct AnswerverifiedShow Answer

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct AnswerverifiedShow Answer

Which of the following is vertical?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the long run, a decrease in the money supply growth rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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More generous unempl...
View 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
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Correct Answer
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Correct Answer
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