Question 1

The long-run Phillips curve would shift to the right if

Accepted Answer

A)  the money supply growth rate decreased or if labor markets become more flexible.
B)  the money supply growth rate decreased, but not if labor markets become more flexible.
C)  labor markets become more flexible, but not if the money supply growth rate decreased.
D)  None of the above is correct.E) A) and B)
F) All of the above

Question 2

Economist A.W. Phillips found a negative correlation between

Accepted Answer

A)  output and unemployment.
B)  unemployment and the interest rate.
C)  output and the interest rate.
D)  wage inflation and unemployment.E) C) and D)
F) None of the above

Question 3

Ultimately, the change in unemployment associated with a change in inflation is due to

Accepted Answer

A)  the shape of the long-run aggregate supply curve.
B)  unanticipated inflation, not inflation per se.
C)  anticipated inflation, not inflation per se.
D)  a change in the natural rate of unemployment.E) A) and B)
F) A) and D)

Question 4

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Accepted Answer

Inflation rises and unemployment falls. ...

Question 5

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)  reduced both unemployment and inflation.
B)  reduced inflation significantly, but at the cost of a severe recession.
C)  reduced unemployment significantly, but at the cost of higher inflation.
D)  raised both unemployment and inflation.E) B) and D)
F) A) and B)

Question 6

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) None of the above

Question 7

An increase in the price of oil shifts the

Accepted Answer

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

Question 8

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 D)
F) A) and C)

Question 9

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Accepted Answer

A)  If so, this might have been the result of a negative supply shock or an increase in expected inflation.
B)  If so, this might been the result of a negative supply shock, or a decrease in expected inflation.
C)  If so, this might have been the result of a positive supply shock, or an increase in expected inflation.
D)  If so, this might have been the result of a positive supply shock, or a decrease in expected inflation.E) None of the above
F) A) and B)

Question 10

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 11

Any policy change that reduced the natural rate of unemployment

Accepted Answer

A)  would shift the long-run Phillips curve to the right.
B)  would shift the long-run aggregate-supply curve to the right.
C)  would be a policy change that impeded the functioning of the labor market.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 12

If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower

Accepted Answer

A)  in the long run and the short run.
B)  in the long run but not the short run.
C)  in the short run but not the long run.
D)  in neither the short run nor the long run.E) All of the above
F) A) and C)

Question 13

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Accepted Answer

Friedman and Phelps predicted that, over...

Question 14

One determinant of the long-run average unemployment rate is the

Accepted Answer

A)  market power of unions, while the inflation rate depends primarily upon government spending.
B)  minimum wage, while the inflation rate depends primarily upon the money supply growth rate.
C)  rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions.
D)  existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive.E) All of the above
F) C) and D)

Question 15

In the early 1970s, the short-run Phillips curve shifted

Accepted Answer

A)  rightward as inflation expectations rose.
B)  rightward as inflation expectations fell.
C)  leftward as inflation expectations rose.
D)  leftward as inflation expectations fell.E) A) and C)
F) All of the above

Question 16

Refer to The Economy in 2008. In the short run the increased prices of world commodities

Accepted Answer

A)  raised both the price level and output.
B)  raised the price level and reduced output.
C)  reduced the price level and raised output.
D)  reduced both the price level and output.E) B) and D)
F) A) and C)

Question 17

Which of the following would cause the price level to fall and output to rise 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 D)
F) B) and C)

Question 18

Refer to The Economy in 2008. Given the effects of the financial and housing crisis on the price level and output and the effects of increased world commodity prices on the price level and output, the aggregate demand and aggregate supply model tells us that

Accepted Answer

A)  output rises and the price level falls.
B)  output may rise, fall or stay the same and the price level rises.
C)  output falls and the price level may rise, fall or stay the same.
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 19

A central bank that accommodates an aggregate supply shock

Accepted Answer

A)  increases the money supply, making the inflation rate rise.
B)  increases the money supply, making the inflation rate fall.
C)  decreases the money supply, making the inflation rate rise.
D)  decreases the money supply, making the inflation rate fall.E) C) and D)
F) All of the above

Question 20

Figure 35-7
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Accepted Answer

A)  A and 1.
B)  back to C and 3.
C)  D and 4.
D)  F and 5.E) A) and B)
F) A) and C)

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

If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower

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Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

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Any policy change that reduced the natural rate of unemployment

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If the natural rate of unemployment falls,

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A central bank that accommodates an aggregate supply shock

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An increase in the price of oil shifts the

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Refer to The Economy in 2008. In the short run the increased prices of world commodities

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Refer to The Economy in 2008. Given the effects of the financial and housing crisis on the price level and output and the effects of increased world commodity prices on the price level and output, the aggregate demand and aggregate supply model tells us that

Correct AnswerverifiedShow Answer

One determinant of the long-run average unemployment rate is the

Correct AnswerverifiedShow Answer

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Correct AnswerverifiedFriedman and Phelps predicted that, over...View AnswerShow Answer

In the early 1970s, the short-run Phillips curve shifted

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Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

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Ultimately, the change in unemployment associated with a change in inflation is due to

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

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Economist A.W. Phillips found a negative correlation between

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Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

The restrictive monetary policy followed by the Fed in the early 1980s

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

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The long-run Phillips curve would shift to the right if

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If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct AnswerverifiedInflation rises and unemployment falls. ...View AnswerShow Answer

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Friedman and Phelps predicted that, over...
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Inflation rises and unemployment falls. ...
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