Question 1

Figure 16-1
 
-Refer to the Figure 16-1. If the economy starts at c and 1, then in the short run, where does a decrease in aggregate demand move the economy?

Accepted Answer

A)   a and 2
B)   d and 3
C)   e and 3
D)   a and 3E) A) and D)
F) A) and B)

Question 2

Some economists argue that simply and 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 reform, people expect that the government will soon start printing more money again to pay for its expenditures, and the promise to fight inflation will not be credible. Explain the importance of an inflation-reduction policy that is announced ahead of time and is credible.

Accepted Answer

In a country where expected inflation ha...

Question 3

Figure 16-4
 
-Refer to the Figure 16-4. If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which point in the short run?

Accepted Answer

A)   point a
B)   point b
C)   point c
D)   point dE) A) and B)
F) None of the above

Question 4

The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 5

What would shift the long-run Phillips curve to the right?

Accepted Answer

A)   an increase in the money supply
B)   an increase in the tax rate
C)   increases in unemployment compensation
D)   a decrease in the unemployment rateE) None of the above
F) All of the above

Question 6

Figure 16-3
 
-Refer to the Figure 16-3. Starting from c and 3, where does a decrease in aggregate demand move the economy to, in the short run and the long run?

Accepted Answer

A)   a and 1 in the short run, b and 2 in the long run
B)   b and 2 in the short run, a and 1 in the long run
C)   d and 4 in the short run, e and 5 in the long run
D)   b and 4 in the short run, e and 1 in the long runE) A) and B)
F) A) and C)

Question 7

Figure 16-3
 
-Refer to the Figure 16-3. Starting from c and 3, where does an increase in aggregate demand move the economy to, in the short run and the long run?

Accepted Answer

A)   a and 1 in the short run, b and 2 in the long run
B)   b and 2 in the short run, a and 1 in the long run
C)   d and 4 in the short run, e and 5 in the long run
D)   d and 2 in the short run, a and 5 in the long runE) B) and C)
F) A) and D)

Question 8

How will an adverse supply shock shift the short-run Phillips curve, and how does inflation change?

Accepted Answer

A)   It will shift the short-run Phillips curve right, and inflation will rise.
B)   It will shift the short-run Phillips curve right, and inflation will fall.
C)   It will shift the short-run Phillips curve left, and inflation will rise.
D)   It will shift the short-run Phillips curve left, and inflation will fall.E) A) and C)
F) B) and D)

Question 9

Figure 16-2
 
-Refer to the Figure 16-2. What is Curve 2?

Accepted Answer

A)   the long-run Phillips curve
B)   the short-run Phillips curve
C)   the long-run aggregate-demand curve
D)   the short-run aggregate-demand curveE) None of the above
F) B) and D)

Question 10

In the long run, people come to expect whatever inflation rate the Bank of Canada chooses to produce, so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 11

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

Accepted Answer

A)   Unemployment is high, so there is upward pressure on wages and prices.
B)   Unemployment is high, so there is downward pressure on wages and prices.
C)   Unemployment is low, so there is upward pressure on wages and prices.
D)   Unemployment is low, so there is downward pressure on wages and prices.E) B) and C)
F) B) and D)

Question 12

Suppose the long-run Phillips curve shifts to the left. For any given rate of money growth and inflation, how would unemployment and output change?

Accepted Answer

A)   Unemployment would be higher, and output would be lower.
B)   Unemployment would be higher, and output would be higher.
C)   Unemployment would be lower, and output would be lower.
D)   Unemployment would be lower, and output would be higher.E) B) and C)
F) B) and D)

Question 13

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 14

Among other things, what determines the long-run average unemployment rate and inflation, respectively?

Accepted Answer

A)   the market power of unions; government spending
B)   efficiency wages; the money supply growth rate
C)   the rate of growth of the money supply; the market power of unions
D)   the minimum wage; the extent to which firms are competitiveE) A) and B)
F) B) and D)

Question 15

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Accepted Answer

A)   where expected inflation is greater than actual inflation
B)   where expected inflation equals actual inflation
C)   where the quantity of goods and services demanded equals the quantity supplied
D)   where the quantity of labour demanded equals the quantity suppliedE) B) and D)
F) B) and C)

Question 16

Figure 16-4
 
-Refer to the Figure 16-4. Along SRPC1, what is the expected rate of inflation?

Accepted Answer

A)   0 percent
B)   2 percent
C)   5 percent
D)   8 percentE) A) and D)
F) A) and C)

Question 17

Suppose an economy with high inflation decides to decrease the money supply growth rate. Which of the following best describes the results?

Accepted Answer

A)   Initially unemployment rises. Eventually the short-run Phillips curve shifts right.
B)   Initially unemployment rises. Eventually the short-run Phillips curve shifts left.
C)   Initially unemployment falls. Eventually the short-run Phillips curve shifts right.
D)   Initially unemployment falls. Eventually the short-run Phillips curve shifts left.E) B) and C)
F) None of the above

Question 18

Which of the following would shift aggregate supply to the right?

Accepted Answer

A)   increasing commodity prices
B)   an increase in money supply
C)   an increase in wages
D)   an increase in the economy's capital stockE) A) and B)
F) A) and C)

Question 19

What is a long-run economic aspect on which most economists agree?

Accepted Answer

A)   The natural rate of unemployment depends primarily on the level of aggregate demand.
B)   Inflation depends primarily upon the money supply growth rate.
C)   There is a direct relationship between the inflation rate and the natural rate of unemployment.
D)   The rate of economic growth depends primarily on the growth in money supply.E) A) and D)
F) B) and D)

Question 20

Figure 16-2
 
-Refer to the Figure 16-2. Where is the money supply growth rate the greatest?

Accepted Answer

A)   at a
B)   at b
C)   at c
D)   at eE) C) and D)
F) All of the above

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

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

Correct Answer
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Figure 16-2 -Refer to the Figure 16-2. What is Curve 2?

Correct Answer
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What is a long-run economic aspect on which most economists agree?

Correct Answer
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Figure 16-1 -Refer to the Figure 16-1. If the economy starts at c and 1, then in the short run, where does a decrease in aggregate demand move the economy?

Correct Answer
verified

How will an adverse supply shock shift the short-run Phillips curve, and how does inflation change?

Correct Answer
verified

Among other things, what determines the long-run average unemployment rate and inflation, respectively?

Correct Answer
verified

What would shift the long-run Phillips curve to the right?

Correct Answer
verified

Which of the following would shift aggregate supply to the right?

Correct Answer
verified

The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

Correct Answer
verified

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Correct Answer
verified

Correct Answer
verified
In a country where expected inflation ha...
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Figure 16-3 -Refer to the Figure 16-3. Starting from c and 3, where does a decrease in aggregate demand move the economy to, in the short run and the long run?

Correct Answer
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Figure 16-4 -Refer to the Figure 16-4. Along SRPC1, what is the expected rate of inflation?

Correct Answer
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Suppose the long-run Phillips curve shifts to the left. For any given rate of money growth and inflation, how would unemployment and output change?

Correct Answer
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Figure 16-3 -Refer to the Figure 16-3. Starting from c and 3, where does an increase in aggregate demand move the economy to, in the short run and the long run?

Correct Answer
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Figure 16-2 -Refer to the Figure 16-2. Where is the money supply growth rate the greatest?

Correct Answer
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Figure 16-4 -Refer to the Figure 16-4. If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which point in the short run?

Correct Answer
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Suppose an economy with high inflation decides to decrease the money supply growth rate. Which of the following best describes the results?

Correct Answer
verified

In the long run, people come to expect whatever inflation rate the Bank of Canada chooses to produce, so unemployment returns to its natural rate.

Correct Answer
verified

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

Figure 16-2 -Refer to the Figure 16-2. What is Curve 2?

Correct AnswerverifiedShow Answer

What is a long-run economic aspect on which most economists agree?

Correct AnswerverifiedShow Answer

Figure 16-1 -Refer to the Figure 16-1. If the economy starts at c and 1, then in the short run, where does a decrease in aggregate demand move the economy?

Correct AnswerverifiedShow Answer

How will an adverse supply shock shift the short-run Phillips curve, and how does inflation change?

Correct AnswerverifiedShow Answer

Among other things, what determines the long-run average unemployment rate and inflation, respectively?

Correct AnswerverifiedShow Answer

What would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

Which of the following would shift aggregate supply to the right?

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

Correct AnswerverifiedShow Answer

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn a country where expected inflation ha...View AnswerShow Answer

Figure 16-3 -Refer to the Figure 16-3. Starting from c and 3, where does a decrease in aggregate demand move the economy to, in the short run and the long run?

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Figure 16-4 -Refer to the Figure 16-4. Along SRPC1, what is the expected rate of inflation?

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Suppose the long-run Phillips curve shifts to the left. For any given rate of money growth and inflation, how would unemployment and output change?

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Figure 16-3 -Refer to the Figure 16-3. Starting from c and 3, where does an increase in aggregate demand move the economy to, in the short run and the long run?

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Figure 16-2 -Refer to the Figure 16-2. Where is the money supply growth rate the greatest?

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Figure 16-4 -Refer to the Figure 16-4. If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which point in the short run?

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Suppose an economy with high inflation decides to decrease the money supply growth rate. Which of the following best describes the results?

Correct AnswerverifiedShow Answer

In the long run, people come to expect whatever inflation rate the Bank of Canada chooses to produce, so unemployment returns to its natural rate.

Correct AnswerverifiedShow Answer

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

Correct AnswerverifiedShow Answer

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In a country where expected inflation ha...
View Answer

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