Question 1

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

A)  downward pressures on prices and wages.
B)  downward pressures on prices and upward pressures on wages.
C)  upward pressures on prices and downward pressures on wages.
D)  upward pressures on prices and wages.E) B) and D)
F) C) and D)

Question 2

A shock increases the costs of production.Given the effects of this shock,if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A)  increase the rate at which the money supply increases.This will also move inflation closer to its previous rate..
B)  increase the rate at which the money supply increases.However,this will make inflation higher than its previous rate
C)  decrease the rate at which the money supply increases.This will also move inflation closer to its original rate
D)  decrease the rate at which the money supply increases.However,this will make higher than its previous rate.E) A) and D)
F) C) and D)

Question 3

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

Accepted Answer

A)  5/2.
B)  3/2.
C)  2/3.
D)  2/5.E) A) and D)
F) All of the above

Question 4

If monetary policy moves unemployment below its natural rate,both expected and actual inflation will rise.

Accepted Answer

A) True 
 B)False

Question 5

Figure 36-8.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." 1 to AS2 A) results in a more favorable trade-off between inflation and unemployment. B) results in a more favorable trade-off between inflation and the growth rate of real GDP. C) represents an adverse shock to aggregate supply. D) represents a favorable shock to aggregate supply." class="answers-bank-image d-inline" rel="preload" > 1 to AS2 A) results in a more favorable trade-off between inflation and unemployment. B) results in a more favorable trade-off between inflation and the growth rate of real GDP. C) represents an adverse shock to aggregate supply. D) represents a favorable shock to aggregate supply." class="answers-bank-image d-inline" rel="preload" >

-Refer to Figure 36-8.The shift of the aggregate-supply curve from AS1 to AS2

Accepted Answer

A)  results in a more favorable trade-off between inflation and unemployment.
B)  results in a more favorable trade-off between inflation and the growth rate of real GDP.
C)  represents an adverse shock to aggregate supply.
D)  represents a favorable shock to aggregate supply.E) A) and C)
F) All of the above

Question 6

A country is likely to have a higher sacrifice ratio if

Accepted Answer

A)  Contracts are shorter,and people believe the central bank will reduce inflation.
B)  Contracts are longer,and people believe the central bank will not reduce inflation
C)  Contracts are longer,and people believe the central bank will reduce inflation.
D)  Contracts are shorter,and people believe the central bank will not reduce inflation.E) None of the above
F) B) and C)

Question 7

If the short-run Phillips curve were stable,which of the following would be unusual?

Accepted Answer

A)  an increase in government spending and a fall in unemployment
B)  an increase in inflation and a decrease in output
C)  a decrease in the inflation rate and a rise in the unemployment rate
D)  a decrease in the money supply and a rise in the unemployment rate.E) B) and D)
F) A) and B)

Question 8

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 9

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) All of the above
F) B) and C)

Question 10

In the late 1960s,Milton Friedman and Edmund Phelps argued that

Accepted Answer

A)  the trade-off between inflation and unemployment did not apply in the long run This claim is consistent with monetary neutrality in the long run.
B)  the trade-off between inflation and unemployment did not apply in the long run.This claim is inconsistent with monetary neutrality in the long run.
C)  the trade-off between inflation and unemployment applied in both the short run and the long run.This claim is consistent with monetary neutrality in the long run.
D)  the trade-off between inflation and unemployment applied in both the short run and the long run.This claim is inconsistent with monetary neutrality in the long run.E) A) and C)
F) B) and C)

Question 11

In the Friedman-Phelps analysis,when inflation is less than expected,the unemployment rate is less than the natural rate.

Accepted Answer

A) True 
 B)False

Question 12

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 C)
F) A) and D)

Question 13

The sacrifice ratio is the

Accepted Answer

A)  sum of the inflation and unemployment rates.
B)  inflation rate divided by the unemployment rate.
C)  number of percentage points annual output falls for each percentage point reduction in inflation.
D)  number of percentage points unemployment rises for each percentage point reduction in inflation.E) A) and B)
F) A) and C)

Question 14

Samuelson and Solow argued that a combination of low unemployment and low inflation

Accepted Answer

A)  was impossible given the historical data as summarized by the Phillips curve.
B)  could be achieved with an "appropriate" fiscal policy.
C)  could be achieved with an "appropriate" monetary policy.
D)  could be achieved with an "appropriate" mix of monetary and fiscal policies.E) A) and D)
F) A) and B)

Question 15

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same,then policymakers

Accepted Answer

A)  Can not exploit a tradeoff between inflation and unemployment in either the short or long run.
B)  Can exploit a tradeoff between inflation and unemployment in the short run but not in the long run.
C)  Can exploit a tradeoff between inflation and unemployment in both the short run and the long run.
D)  Can exploit a tradeoff between inflation and unemployment in the long run,but not the short run.E) A) and B)
F) A) and C)

Question 16

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Accepted Answer

A) True 
 B)False

Question 17

An event that directly affects firms' costs of production and thus the prices they charge is called

Accepted Answer

A)  a Phillips contraction.
B)  an inflationary spiral.
C)  a demand shock.
D)  a supply shock.E) A) and B)
F) All of the above

Question 18

Figure 36-7
Use this graph to answer the questions below. 
-Refer to figure 36-7.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A)  7% unemployment and 1% inflation
B)  7% unemployment and 3% inflation
C)  3% unemployment and 5% inflation
D)  3% unemployment and 7% inflationE) B) and C)
F) All of the above

Question 19

Figure 36-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate.  
-Refer to Figure 36-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Accepted Answer

A)  that applies both in the short run and in the long run.
B)  that is relevant to choices involving fiscal policy,but not to choices involving monetary policy.
C)  of inflation and unemployment.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 20

Suppose that the Prime Minister and Parliament of Veridian are disappointed with the high inflation rates under the current system where the Veridian Ministry of Finance is in charge of the money supply.They make reforms to lower inflation from its current rate of 8%.Suppose further that the public is confident that with the reforms in place that inflation will fall to 2%.Also suppose that those in control of the money supply actually conduct monetary policy so that the actual inflation rate is 4%.Using long-run and short-run Phillips curves and assuming the natural rate of unemployment is 6%,show the initial long run equilibrium of Veridian and label it "A".Assuming that the government had actually set inflation at 2% and that the public believed this,label the long-run equilibrium "B".Now,suppose that inflation expectations fell to 2% and that the government unexpectedly created inflation of 4%.Show the short-run equilibrium and label it "C".If the money supply continues to grow at a rate consistent with 4% inflation,show where the economy ends up and label that point "D".

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Veridian ...

Exam 36: The Short-Run Trade-Off Between Inflation and Unemployment

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

Correct Answer
verified

If monetary policy moves unemployment below its natural rate,both expected and actual inflation will rise.

Correct Answer
verified

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same,then policymakers

Correct Answer
verified

If the short-run Phillips curve were stable,which of the following would be unusual?

Correct Answer
verified

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct Answer
verified

An event that directly affects firms' costs of production and thus the prices they charge is called

Correct Answer
verified

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Correct Answer
verified

Correct Answer
verified

Figure 36-8.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 36-8.The shift of the aggregate-supply curve from AS₁ to AS₂

Correct Answer
verified

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct Answer
verified

In the long run,

Correct Answer
verified

In the Friedman-Phelps analysis,when inflation is less than expected,the unemployment rate is less than the natural rate.

Correct Answer
verified

Correct Answer
verified
Veridian ...
View Answer

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

Correct Answer
verified

In the late 1960s,Milton Friedman and Edmund Phelps argued that

Correct Answer
verified

Samuelson and Solow argued that a combination of low unemployment and low inflation

Correct Answer
verified

A country is likely to have a higher sacrifice ratio if

Correct Answer
verified

Figure 36-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate. -Refer to Figure 36-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Correct Answer
verified

A shock increases the costs of production.Given the effects of this shock,if the central bank wants to return the unemployment rate towards its previous level it would

Correct Answer
verified

The sacrifice ratio is the

Correct Answer
verified

Exam 36: The Short-Run Trade-Off Between Inflation and Unemployment

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

Correct AnswerverifiedShow Answer

If monetary policy moves unemployment below its natural rate,both expected and actual inflation will rise.

Correct AnswerverifiedShow Answer

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same,then policymakers

Correct AnswerverifiedShow Answer

If the short-run Phillips curve were stable,which of the following would be unusual?

Correct AnswerverifiedShow Answer

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct AnswerverifiedShow Answer

An event that directly affects firms' costs of production and thus the prices they charge is called

Correct AnswerverifiedShow Answer

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 36-8.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 36-8.The shift of the aggregate-supply curve from AS1 to AS2

Correct AnswerverifiedShow Answer

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

In the Friedman-Phelps analysis,when inflation is less than expected,the unemployment rate is less than the natural rate.

Correct AnswerverifiedShow Answer

Correct Answerverified Veridian ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In the late 1960s,Milton Friedman and Edmund Phelps argued that

Correct AnswerverifiedShow Answer

Samuelson and Solow argued that a combination of low unemployment and low inflation

Correct AnswerverifiedShow Answer

A country is likely to have a higher sacrifice ratio if

Correct AnswerverifiedShow Answer

Figure 36-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate. -Refer to Figure 36-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Correct AnswerverifiedShow Answer

A shock increases the costs of production.Given the effects of this shock,if the central bank wants to return the unemployment rate towards its previous level it would

Correct AnswerverifiedShow Answer

The sacrifice ratio is the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 36-8.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 36-8.The shift of the aggregate-supply curve from AS₁ to AS₂

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Veridian ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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