Question 1

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 D)
F) B) and D)

Question 2

Data for the United States traced out an almost perfect Phillips curve for much of the

Accepted Answer

A)  1960s.
B)  1970s.
C)  1980s.
D)  1990s.E) C) and D)
F) B) and D)

Question 3

Most economists believe that a tradeoff between inflation and unemployment exists

Accepted Answer

A)  only in the short run.
B)  only in the long run.
C)  in both the short and long run.
D)  in neither the short nor long run.E) A) and B)
F) B) and C)

Question 4

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

Accepted Answer

A)  increases inflation and shifts the short-run Phillips curve right.
B)  increases inflation and shifts the short-run Phillips curve left.
C)  decreases inflation and shifts the short-run Philips curve right.
D)  decreases inflation and shifts the short-run Phillips curve left.E) A) and B)
F) A) and C)

Question 5

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

Accepted Answer

A)  10%
B)  8%
C)  6%
D)  None of the above is correct.E) All of the above
F) None of the above

Question 6

Which of the following both make the sacrifice ratio higher than otherwise?

Accepted Answer

A)  the Phillips curve is steep, inflation expectations adjust quickly.
B)  the Phillips curve is steep, inflation expectations adjust slowly.
C)  the Phillips curve is flat, inflation expectations adjust quickly
D)  the Phillips curve is flat, inflation expectations adjust slowly.E) All of the above
F) B) and C)

Question 7

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

Accepted Answer

A)  shifts both the long-run and the short-run Phillips curves right.
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 8

Figure 35-4. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis.  
-Refer to Figure 35-4. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the right-hand graph. The price level in the year 2018 is

Accepted Answer

A)  117.25.
B)  114.95.
C)  113.12.
D)  111.10.E) C) and D)
F) B) and C)

Question 9

Which of the following is not correct?

Accepted Answer

A)  In the short run, policymakers face a tradeoff between inflation and unemployment.
B)  Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left.
C)  Unemployment can be changed only by the use of government policy.
D)  The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible.E) A) and B)
F) A) and C)

Question 10

How does a central bank's accommodation of an adverse supply shock change the long-run results of the shock?

Accepted Answer

If a central bank accommodates an advers...

Question 11

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Accepted Answer

The answer of Assuming that rational expectations theory does not...

Question 12

If policymakers expand aggregate demand, then in the long run

Accepted Answer

A)  prices will be higher and unemployment will be lower.
B)  prices will be higher and unemployment will be unchanged.
C)  prices and unemployment will be unchanged.
D)  None of the above is correct.E) B) and C)
F) None of the above

Question 13

Suppose the economy is currently experiencing 9% inflation per year. If the Fed wants to reduce inflation to 3% and the sacrifice ratio is 4, then how much annual output must be sacrificed in the transition?

Accepted Answer

A)  4%
B)  8%
C)  16%
D)  24%E) A) and B)
F) B) and C)

Question 14

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

Accepted Answer

Continued higher money supply growth rai...

Question 15

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Accepted Answer

A) True 
 B)False

Question 16

Figure 35-7
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-7. The economy would move from 3 to 5

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly.
B)  in the short run if money supply growth decreased unexpectedly.
C)  in the long run if money supply growth increases.
D)  in the long run if money supply growth decreases.E) A) and B)
F) C) and D)

Question 17

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

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

Question 18

A favorable supply shock causes output 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.E) B) and C)
F) A) and C)

Question 19

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Accepted Answer

A)  reduced inflation and unemployment.
B)  raised inflation and unemployment.
C)  reduced inflation and raised unemployment.
D)  raised inflation and reduced unemployment.E) A) and B)
F) None of the above

Question 20

Figure 35-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in taxes moves the economy to

Accepted Answer

A)  D and 2.
B)  D and 3.
C)  back to C and 1.
D)  None of the above is correct.E) A) and B)
F) A) and C)

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

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

Correct Answer
verified

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from 3 to 5

Correct Answer
verified

Which of the following both make the sacrifice ratio higher than otherwise?

Correct Answer
verified

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

Correct Answer
verified

Data for the United States traced out an almost perfect Phillips curve for much of the

Correct Answer
verified

Most economists believe that a tradeoff between inflation and unemployment exists

Correct Answer
verified

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct Answer
verified

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

Correct Answer
verified
Continued higher money supply growth rai...
View Answer

If policymakers expand aggregate demand, then in the long run

Correct Answer
verified

How does a central bank's accommodation of an adverse supply shock change the long-run results of the shock?

Correct Answer
verified
If a central bank accommodates an advers...
View Answer

Which of the following is not correct?

Correct Answer
verified

Which of the following would not be associated with a favorable supply shock?

Correct Answer
verified

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in taxes moves the economy to

Correct Answer
verified

Suppose the economy is currently experiencing 9% inflation per year. If the Fed wants to reduce inflation to 3% and the sacrifice ratio is 4, then how much annual output must be sacrificed in the transition?

Correct Answer
verified

Correct Answer
verified

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

Correct Answer
verified

A favorable supply shock causes output to

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

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from 3 to 5

Correct AnswerverifiedShow Answer

Which of the following both make the sacrifice ratio higher than otherwise?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Data for the United States traced out an almost perfect Phillips curve for much of the

Correct AnswerverifiedShow Answer

Most economists believe that a tradeoff between inflation and unemployment exists

Correct AnswerverifiedShow Answer

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct AnswerverifiedShow Answer

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

Correct AnswerverifiedContinued higher money supply growth rai...View AnswerShow Answer

If policymakers expand aggregate demand, then in the long run

Correct AnswerverifiedShow Answer

How does a central bank's accommodation of an adverse supply shock change the long-run results of the shock?

Correct AnswerverifiedIf a central bank accommodates an advers...View AnswerShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Which of the following would not be associated with a favorable supply shock?

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in taxes moves the economy to

Correct AnswerverifiedShow Answer

Suppose the economy is currently experiencing 9% inflation per year. If the Fed wants to reduce inflation to 3% and the sacrifice ratio is 4, then how much annual output must be sacrificed in the transition?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

Correct AnswerverifiedShow Answer

A favorable supply shock causes output to

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

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Correct AnswerverifiedShow Answer

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Continued higher money supply growth rai...
View Answer

Correct Answer
verified

Correct Answer
verified
If a central bank accommodates an advers...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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