Question 1

Disinflation is defined as a

Accepted Answer

A)   zero rate of inflation.
B)   constant rate of inflation.
C)   reduction in the rate of inflation.
D)   negative rate of inflation.E) A) and C)
F) A) and B)

Question 2

By raising aggregate demand more than anticipated,policymakers

Accepted Answer

A)   reduce unemployment for awhile.
B)   raise unemployment for awhile.
C)   reduce unemployment permanently.
D)   None of the above is correct.E) A) and C)
F) All of the above

Question 3

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.In the short-run the effects of the housing and financial crises

Accepted Answer

A)   raise both inflation and the unemployment rate.
B)   raise the inflation rate and reduce the unemployment rate.
C)   reduce the inflation rate and raise the unemployment rate.
D)   reduce both the inflation rate and the unemployment rate.E) None of the above
F) A) and B)

Question 4

The economist A.W.Phillips published a famous article in 1958 in which he showed a

Accepted Answer

A)   negative correlation between the rate of unemployment and the rate of inflation.
B)   positive correlation between the rate of unemployment and the rate of inflation.
C)   negative correlation between the rate of unemployment and the rate of interest.
D)   positive correlation between the rate of unemployment and the rate of interestE) All of the above
F) C) and D)

Question 5

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not associated with an adverse supply shock?

Accepted Answer

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

Question 7

One determinant of the natural rate of unemployment is the

Accepted Answer

A)   rate of growth of the money supply.
B)   minimum wage rate.
C)   expected inflation rate.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 8

In the long run,an increase in the money supply

Accepted Answer

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

Question 9

On a given short-run Phillips curve which of the following is held constant?

Accepted Answer

A)   the level of GDP
B)   the unemployment rate
C)   expected inflation
D)   employmentE) A) and B)
F) A) and C)

Question 10

Which of the following leads to a lower level of unemployment in the long run?

Accepted Answer

A)   both an increase in the size of the money supply and an increase in the money supply growth rate
B)   an increase in the size of the money supply but not an increase in the money supply growth rate
C)   an increase in the money supply growth rate,but not an increase in the size of the money supply
D)   neither an increase in the size of the money supply nor an increase in the money supply growth rateE) B) and D)
F) A) and B)

Question 11

In the long run,

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 tradeoff between the inflation rate and the natural rate of unemployment.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 12

Which of the following results in higher inflation and higher unemployment in the short run?

Accepted Answer

A)   a more expansionary monetary policy
B)   a more contractionary monetary policy
C)   a decrease in the minimum wage
D)   an adverse supply shock such as an increase in the price of oilE) A) and C)
F) C) and D)

Question 13

If the minimum wage increased,then at any given rate of inflation

Accepted Answer

A)   both output and employment would be higher.
B)   neither output nor employment would be higher.
C)   output would be higher and unemployment would be lower.
D)   output would be lower and unemployment would be higher.E) B) and D)
F) A) and B)

Question 14

More flexible labor markets will shift

Accepted Answer

A)   both the long-run Phillips curve and the long-run aggregate supply curve to the right.
B)   both the long-run Phillips curve and the long-run aggregate supply curve to the left.
C)   the long-run Phillips curve to the right and the long-run aggregate supply curve to the left.
D)   the long-run Phillips curve to the left and the long-run aggregate supply curve to the right.E) All of the above
F) None of the above

Question 15

Suppose that money supply growth increases.In the long run,this increases employment according to

Accepted Answer

A)   both the long-run Phillips curve and the aggregate demand and aggregate supply model.
B)   neither the long-run Phillips curve nor the aggregate demand and aggregate supply model.
C)   the long-run Phillips curve,but not the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model,but not the long-run Phillips curveE) B) and D)
F) A) and B)

Question 16

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie...

Question 17

The government of Tsiratenom considers two policies.Policy A would shift AD right by 200 units while policy B would shift AD right by 300 units.According to the short-run Phillips curve policy A will lead

Accepted Answer

A)   to a lower unemployment rate and a lower inflation rate than policy B.
B)   to a lower unemployment rate and a higher inflation rate than policy B.
C)   to a higher unemployment rate and lower inflation rate than policy B.
D)   to a higher unemployment rate and higher inflation rate than policy B.E) C) and D)
F) All of the above

Question 18

The misery index is supposed to measure the

Accepted Answer

A)   social cost of unemployment.
B)   health of the economy.
C)   lost output associated with a particular unemployment rate.
D)   short-run tradeoff between inflation and unemployment.E) B) and C)
F) A) and B)

Question 19

A favorable supply shock will cause inflation to

Accepted Answer

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

Question 20

According to Friedman and Phelps,the unemployment rate

Accepted Answer

A)   is never below its natural rate.
B)   is below its natural rate when actual inflation is greater than expected inflation.
C)   is below its natural rate when actual inflation is less than expected inflation.
D)   is below its natural rate when actual inflation equals expected inflation.E) C) and D)
F) B) and C)

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

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

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Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct AnswerverifiedA downward-sloping Phillips curve implie...View AnswerShow Answer

According to Friedman and Phelps,the unemployment rate

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Which of the following is not associated with an adverse supply shock?

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A favorable supply shock will cause inflation to

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More flexible labor markets will shift

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Which of the following results in higher inflation and higher unemployment in the short run?

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By raising aggregate demand more than anticipated,policymakers

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The economist A.W.Phillips published a famous article in 1958 in which he showed a

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In the long run,

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On a given short-run Phillips curve which of the following is held constant?

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Suppose that money supply growth increases.In the long run,this increases employment according to

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Which of the following leads to a lower level of unemployment in the long run?

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Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.In the short-run the effects of the housing and financial crises

Correct AnswerverifiedShow Answer

One determinant of the natural rate of unemployment is the

Correct AnswerverifiedShow Answer

The government of Tsiratenom considers two policies.Policy A would shift AD right by 200 units while policy B would shift AD right by 300 units.According to the short-run Phillips curve policy A will lead

Correct AnswerverifiedShow Answer

The misery index is supposed to measure the

Correct AnswerverifiedShow Answer

In the long run,an increase in the money supply

Correct AnswerverifiedShow Answer

Disinflation is defined as a

Correct AnswerverifiedShow Answer

If the minimum wage increased,then at any given rate of inflation

Correct AnswerverifiedShow Answer

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A downward-sloping Phillips curve implie...
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