Question 1

In 1979,Fed Chair Paul Volcker

Accepted Answer

A)   instituted an accommodative monetary policy to address adverse supply shocks.
B)   believed that inflation had not yet reached unacceptable levels.
C)   believed decreasing inflation would temporarily decrease output growth.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 2

Suppose that businesses become less optimistic about the future.Assuming no change in inflation expectations,how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?

Accepted Answer

The decrease in spending is sh...

Question 3

Prime Minister Emma Bigshot urges passage of a bill to reduce unemployment benefits from very generous levels in her country.She also urges her country's central bank to raise the rate at which the money supply is increasing.In the long run which,if either,of these policies will reduce the unemployment rate?

Accepted Answer

A)   both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing
B)   reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing
C)   raising the rate at which the money supply is increasing,but not reducing the generosity of unemployment benefits
D)   neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasingE) None of the above
F) A) and B)

Question 4

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Accepted Answer

A)   Mark gets an increase in his nominal wage.
B)   Bob gets more job offers.
C)   Susan reduces prices at her pizza restaurant.
D)   Tom reads that the central bank recently raised the money supplyE) A) and C)
F) A) and B)

Question 5

Some economists argue suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work.For example,if a government cuts money growth but makes no real fiscal reforms,people will expect the government will eventually need to expand the money supply to pay for its expenditures.Thus,the promise to fight inflation will not be credible.Explain why credibility is important to a reduction in the inflation rate.

Accepted Answer

If people believe that the government re...

Question 6

Friedman and Phelps argued

Accepted Answer

A)   that in the long run,monetary growth did not influence those factors that determine the economy's unemployment rate.
B)   that the Phillips curve could be exploited in the long run by using monetary,but not fiscal policy.
C)   that the short-run Phillips curve was very steep,but not vertical.
D)   that there was neither a short-run nor long-run tradeoff between inflation and unemployment.E) C) and D)
F) All of the above

Question 7

Other things the same,if the central bank decreases the rate at which it increases the money supply,then

Accepted Answer

A)   unemployment and inflation rise in the short run.
B)   unemployment rises and inflation falls in the short run.
C)   unemployment falls and inflation rises in the short run.
D)   unemployment and inflation fall in the short run.E) All of the above
F) A) and B)

Question 8

If the government reduced the minimum wage and pursued expansionary monetary policy,then in the long run

Accepted Answer

A)   both the unemployment rate and the inflation rate would be higher.
B)   both the unemployment rate and the inflation rate would be lower.
C)   the unemployment rate would be higher and the inflation rate would be lower.
D)   the unemployment rate would be lower and the inflation rate would be higher.E) A) and D)
F) B) and C)

Question 9

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) B) and C)
F) All of the above

Question 10

The monetary-policy framework called inflation targeting is used explicitly by

Accepted Answer

A)   no major country.
B)   most major countries except the United States and Japan.
C)   the United States,but it is not used by other major countries.
D)   most major countries,including the United States and Japan.E) A) and C)
F) B) and D)

Question 11

According to the Phillips curve,policymakers could reduce both inflation and unemployment by

Accepted Answer

A)   increasing the money supply.
B)   increasing government expenditures.
C)   raising taxes.
D)   None of the above is correct.E) A) and B)
F) B) and D)

Question 12

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 movement of the economy from point A to point B,and at the same time a movement from point C to point D,would be described as

Accepted Answer

A)   the outcome of a favorable supply shock.
B)   falling inflation.
C)   stagflation.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 13

If inflation expectations rise,the short-run Phillips curve shifts

Accepted Answer

A)   right,so that at any inflation rate output is higher in the short run than before.
B)   left,so that at any inflation rate output is higher in the short run than before.
C)   right,so that at any inflation rate output is lower in the short run than before.
D)   left,so that at any inflation rate output is lower in the short run than before.E) C) and D)
F) A) and C)

Question 14

Friedman and Phelps concluded that

Accepted Answer

A)   in the long run the Phillips curve is downward sloping,which is consistent with classical theory.
B)   in the long run the Philips curve is downward sloping,which is inconsistent with classical theory.
C)   in the long run the Phillips curve is vertical,which is consistent with classical theory.
D)   in the long run the Phillips curve is vertical,which is inconsistent with classical theory.E) A) and C)
F) B) and D)

Question 15

Suppose that the Prime Minister and Parliament of Veridian are disappointed with the high inflation rates under the current system where the Veridian Ministry of Finance is in charge of the money supply.They make reforms to lower inflation from its current rate of 8%.Suppose further that the public is confident that with the reforms in place that inflation will fall to 2%.Also suppose that those in control of the money supply actually conduct monetary policy so that the actual inflation rate is 4%.Using long-run and short-run Phillips curves and assuming the natural rate of unemployment is 6%,show the initial long run equilibrium of Veridian and label it "A".Assuming that the government had actually set inflation at 2% and that the public believed this,label the long-run equilibrium "B".Now,suppose that inflation expectations fell to 2% and that the government unexpectedly created inflation of 4%.Show the short-run equilibrium and label it "C".If the money supply continues to grow at a rate consistent with 4% inflation,show where the economy ends up and label that point "D".

Accepted Answer

The answer of Suppose that the Prime Minister and Parliament...

Question 16

On a given short-run Phillips curve which of the following is not held constant?

Accepted Answer

A)   the level of GDP
B)   the position of the aggregate-supply curve
C)   expected inflation
D)   the expected growth rate of the money supplyE) C) and D)
F) All of the above

Question 17

For a given short-run Phillips curve,if expected inflation is 10% but actual inflation is 8%,is the unemployment rate above or below its natural rate?

Accepted Answer

The unempl...

Question 18

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

Question 19

Figure 22-5
Use the graph below to answer the following questions. 
-Refer to Figure 22-5.If the economy starts at C and the money supply growth rate increases,in the long run the economy

Accepted Answer

A)   stays at C.
B)   moves to B.
C)   moves to F.
D)   None of the above is consistent wit an increase in the money supply growth rate.E) B) and C)
F) A) and B)

Question 20

In the long run an increase 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) B) and C)
F) C) and D)

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

The monetary-policy framework called inflation targeting is used explicitly by

Correct Answer
verified

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

Correct Answer
verified

Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5.If the economy starts at C and the money supply growth rate increases,in the long run the economy

Correct Answer
verified

Friedman and Phelps concluded that

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If people believe that the government re...
View Answer

In 1979,Fed Chair Paul Volcker

Correct Answer
verified

In the long run an increase in the money supply growth rate affects

Correct Answer
verified

Friedman and Phelps argued

Correct Answer
verified

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Correct Answer
verified

On a given short-run Phillips curve which of the following is not held constant?

Correct Answer
verified

Suppose that businesses become less optimistic about the future.Assuming no change in inflation expectations,how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?

Correct Answer
verified
The decrease in spending is sh...
View Answer

For a given short-run Phillips curve,if expected inflation is 10% but actual inflation is 8%,is the unemployment rate above or below its natural rate?

Correct Answer
verified
The unempl...
View Answer

Correct Answer
verified

Other things the same,if the central bank decreases the rate at which it increases the money supply,then

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

Correct Answer
verified

If inflation expectations rise,the short-run Phillips curve shifts

Correct Answer
verified

According to the Phillips curve,policymakers could reduce both inflation and unemployment by

Correct Answer
verified

If the government reduced the minimum wage and pursued expansionary monetary policy,then in the long run

Correct Answer
verified

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

The monetary-policy framework called inflation targeting is used explicitly by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5.If the economy starts at C and the money supply growth rate increases,in the long run the economy

Correct AnswerverifiedShow Answer

Friedman and Phelps concluded that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf people believe that the government re...View AnswerShow Answer

In 1979,Fed Chair Paul Volcker

Correct AnswerverifiedShow Answer

In the long run an increase in the money supply growth rate affects

Correct AnswerverifiedShow Answer

Friedman and Phelps argued

Correct AnswerverifiedShow Answer

Which of the following would we not expect if government policy moves the economy up along a given short-run Phillips curve?

Correct AnswerverifiedShow Answer

On a given short-run Phillips curve which of the following is not held constant?

Correct AnswerverifiedShow Answer

Suppose that businesses become less optimistic about the future.Assuming no change in inflation expectations,how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?

Correct AnswerverifiedThe decrease in spending is sh...View AnswerShow Answer

For a given short-run Phillips curve,if expected inflation is 10% but actual inflation is 8%,is the unemployment rate above or below its natural rate?

Correct AnswerverifiedThe unempl...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Other things the same,if the central bank decreases the rate at which it increases the money supply,then

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

Correct AnswerverifiedShow Answer

If inflation expectations rise,the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

According to the Phillips curve,policymakers could reduce both inflation and unemployment by

Correct AnswerverifiedShow Answer

If the government reduced the minimum wage and pursued expansionary monetary policy,then in the long run

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If people believe that the government re...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The decrease in spending is sh...
View Answer

Correct Answer
verified
The unempl...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified