Question 1

Figure 16-4
 
-Refer to the Figure 16-4. Along LRPC, what is the expected rate of inflation?

Accepted Answer

A)   0 percent
B)   the actual rate of inflation
C)   3 percent
D)   the natural rate of inflationE) A) and B)
F) A) and C)

Question 2

Figure 16-4
 
-Refer to the Figure 16-4. At point b, how do actual and expected inflation rates and unemployment rates compare?

Accepted Answer

A)   The actual inflation rate is less than the expected inflation rate, and the actual rate of unemployment exceeds the natural rate of unemployment.
B)   The actual inflation rate is greater than the expected inflation rate, and the actual rate of unemployment exceeds the natural rate of unemployment.
C)   The actual inflation rate is less than the expected inflation rate, and the actual rate of unemployment is less than the natural rate of unemployment.
D)   The actual inflation rate is greater than the expected inflation rate, and the actual rate of unemployment is less than the natural rate of unemployment.E) B) and D)
F) B) and C)

Question 3

How could we transform the AD-AS model such that, instead of the price level and output it would show the relationship between the inflation rate (ð) and the rate of output growth (g)?

Accepted Answer

One can start from the AD-AS model in th...

Question 4

In the long run, what effect does an increase in the money supply have on prices and unemployment?

Accepted Answer

A)   It leaves prices and unemployment unchanged.
B)   It lowers prices and unemployment.
C)   It raises prices and leaves unemployment unchanged.
D)   It leaves prices unchanged and reduces unemployment.E) A) and B)
F) A) and C)

Question 5

If the short-run Phillips curve were stable, what would be unusual?

Accepted Answer

A)   an increase in inflation and an increase in output
B)   a decrease in inflation and an increase in unemployment
C)   an increase in both inflation and unemployment
D)   an increase in output and a decrease in unemploymentE) A) and B)
F) B) and C)

Question 6

A decrease in expected inflation shifts which of the following curves, and in what direction?

Accepted Answer

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

Question 7

What is the misery index supposed to measure?

Accepted Answer

A)   the market power of unions
B)   the health of the economy
C)   the degree of inequality
D)   the standard of livingE) A) and B)
F) A) and C)

Question 8

How will an adverse supply shock shift the short-run aggregate-supply curve, and what will be the effect on prices?

Accepted Answer

A)   It will shift the short-run aggregate-supply curve right, making prices rise.
B)   It will shift the short-run aggregate-supply curve left, making prices rise.
C)   It will shift the short-run aggregate-supply curve right, making prices fall.
D)   It will shift the short-run aggregate-supply curve left, making prices fall.E) A) and B)
F) A) and C)

Question 9

How were inflation and unemployment from 1980 to 1989 in Canada?

Accepted Answer

A)   Inflation was relatively low, and there were no fluctuations in unemployment.
B)   Inflation was relatively low, and unemployment was high.
C)   Unemployment was relatively low, but there were large fluctuations in inflation.
D)   There were relatively large fluctuations in both unemployment and inflation.E) A) and B)
F) None of the above

Question 10

Figure 16-4
 
-Refer to the Figure 16-4. At point m, how do actual and expected inflation rates and unemployment rates compare?

Accepted Answer

A)   The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment.
B)   The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment.
C)   The actual inflation rate is less than the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment.
D)   The actual inflation rate is less than the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment.E) C) and D)
F) All of the above

Question 11

If the government raises government expenditures, what happens to prices and unemployment in the short run?

Accepted Answer

A)   Prices rise and unemployment falls.
B)   Prices fall and unemployment rises.
C)   Prices and unemployment rise.
D)   Prices and unemployment fall.E) B) and C)
F) A) and B)

Question 12

Figure 16-1
 
-Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, where does an increase in the money supply move the economy?

Accepted Answer

A)   a and 1
B)   b and 2
C)   c and 3
D)   a and 3E) None of the above
F) A) and C)

Question 13

What is the effect of an adverse supply shock?

Accepted Answer

A)   The long-run aggregate supply curve shifts to the left.
B)   The short-run aggregate supply curve shifts to the right.
C)   The long-run Phillips curve shifts to the left.
D)   The short-run Phillips curve shifts to the right.E) A) and C)
F) A) and D)

Question 14

What did Friedman and Phelps argue about the relationship between inflation and unemployment?

Accepted Answer

A)   The inflation rate is related to unemployment in the long-run.
B)   The inflation rate is unrelated to unemployment in the long-run.
C)   The inflation rate is related to unemployment in the short-run.
D)   The inflation rate is unrelated to unemployment in the short-run.E) B) and C)
F) All of the above

Question 15

If technological change shifts the long-run aggregate-supply curve to the right, it will also do which of the following?

Accepted Answer

A)   It shifts both the short-run and long-run Phillips curves to the right.
B)   It shifts both the short-run and long-run Phillips curves to the left.
C)   It will shift the short-run aggregate-supply curve to the right and the long-run Phillips curve to the left.
D)   It will shift the short-run aggregate-supply curve to the right and leave the long-run Phillips curve unaffected.E) A) and B)
F) B) and C)

Question 16

Suppose the government passes legislation that decreases the natural rate of unemployment. How does this change the long- and short-run Phillips curves?

Accepted Answer

For the long-run Phillips curve, the cha...

Question 17

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 18

Figure 16-2
 
-Refer to the Figure 16-2. If the economy starts at c and the money supply growth rate increases, where does the economy move to in the long run?

Accepted Answer

A)   b
B)   d
C)   e
D)   aE) All of the above
F) B) and C)

Question 19

Figure 16-4
 
-Refer to the Figure 16-4. Along SRPC3, what is the expected rate of inflation?

Accepted Answer

A)   0 percent
B)   2 percent
C)   3 percent
D)   5 percentE) A) and B)
F) None of the above

Question 20

Suppose the minimum wage decreased. At any given rate of inflation, what would happen to output and employment?

Accepted Answer

A)   Both output and employment would be higher.
B)   Both output and employment would be lower.
C)   Output would be higher and unemployment would be lower.
D)   Unemployment would be higher and output would be lower.E) All of the above
F) C) and D)

Exam 16: The Short-Run Tradeoff Between Inflation and Unemployment

How will an adverse supply shock shift the short-run aggregate-supply curve, and what will be the effect on prices?

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Figure 16-2 -Refer to the Figure 16-2. If the economy starts at c and the money supply growth rate increases, where does the economy move to in the long run?

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Figure 16-4 -Refer to the Figure 16-4. Along LRPC, what is the expected rate of inflation?

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If the government raises government expenditures, what happens to prices and unemployment in the short run?

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What did Friedman and Phelps argue about the relationship between inflation and unemployment?

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A decrease in expected inflation shifts which of the following curves, and in what direction?

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If technological change shifts the long-run aggregate-supply curve to the right, it will also do which of the following?

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What is the effect of an adverse supply shock?

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Figure 16-4 -Refer to the Figure 16-4. At point m, how do actual and expected inflation rates and unemployment rates compare?

Correct AnswerverifiedShow Answer

In the long run, what effect does an increase in the money supply have on prices and unemployment?

Correct AnswerverifiedShow Answer

What is the misery index supposed to measure?

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Figure 16-4 -Refer to the Figure 16-4. Along SRPC3, what is the expected rate of inflation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government passes legislation that decreases the natural rate of unemployment. How does this change the long- and short-run Phillips curves?

Correct AnswerverifiedFor the long-run Phillips curve, the cha...View AnswerShow Answer

How could we transform the AD-AS model such that, instead of the price level and output it would show the relationship between the inflation rate (ð) and the rate of output growth (g)?

Correct AnswerverifiedOne can start from the AD-AS model in th...View AnswerShow Answer

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, where does an increase in the money supply move the economy?

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to the Figure 16-4. At point b, how do actual and expected inflation rates and unemployment rates compare?

Correct AnswerverifiedShow Answer

If the short-run Phillips curve were stable, what would be unusual?

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How were inflation and unemployment from 1980 to 1989 in Canada?

Correct AnswerverifiedShow Answer

Suppose the minimum wage decreased. At any given rate of inflation, what would happen to output and employment?

Correct AnswerverifiedShow Answer

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For the long-run Phillips curve, the cha...
View Answer

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One can start from the AD-AS model in th...
View Answer

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Correct Answer
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