Question 1

If a central bank increases the money supply growth rate,then in the short run

Accepted Answer

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

Question 2

A policy change that changes the natural rate of unemployment changes

Accepted Answer

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

Question 3

If unemployment is above its natural rate,what happens to move the economy to long-run equilibrium?

Accepted Answer

A)  Inflation expectations rise which shifts the short-run Phillips curve to the right.
B)  Inflation expectations rise which shifts the short-run Phillips curve to the left.
C)  Inflation expectations fall which shifts the short-run Phillips curve to the right.
D)  Inflation expectations fall which shifts the short-run Phillips curve to the left.E) B) and C)
F) A) and B)

Question 4

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 short run,an unexpected decrease in money supply growth moves the economy to

Accepted Answer

A)  A and 1.
B)  B and 2.
C)  back to C and 3.
D)  D and 4.E) B) and D)
F) A) and B)

Question 5

Which of the following is vertical?

Accepted Answer

A)  both the long-run Phillips curve and the long-run aggregate supply curve
B)  neither the long-run Phillips curve nor the long-run aggregate supply curve
C)  the long-run Phillips curve,but not the long-run aggregate supply curve
D)  the long-run Phillips curve,but not the long-run aggregate supply curve.E) B) and D)
F) All of the above

Question 6

The idea that the long-run Phillips curve is

Accepted Answer

A)  vertical stems from the analysis of Samuelson and Solow.
B)  vertical stems from the analysis of Friedman and Phelps.
C)  vertical was disproved by the experiment that monetary and fiscal policymakers inadvertently created in the 1970s.
D)  downward-sloping can be correct if unemployment responds very quickly to unexpected inflation.E) B) and C)
F) A) and C)

Question 7

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) B) and C)
F) None of the above

Question 8

Which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)  expansionary fiscal policy
B)  an increase in the inflation rate
C)  increases in unemployment compensation
D)  None of the above is correct.E) B) and C)
F) C) and D)

Question 9

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.If the economy starts at C and the money supply growth rate decreases,in the short run the economy moves to

Accepted Answer

A)  B.
B)  C.
C)  F.
D)  None of the above is consistent with a decrease in the money supply growth rate.E) A) and C)
F) B) and C)

Question 10

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)  the unemployment rate will be below its natural rate whenever inflation is negative.
B)  the unemployment rate will be below its natural rate whenever inflation is positive.
C)  the unemployment rate will be below its natural rate only if inflation is less than expected.
D)  the unemployment rate will be below its natural rate only if inflation is greater than expected.E) B) and C)
F) All of the above

Question 11

A policy that raised the natural rate of unemployment would shift

Accepted Answer

A)  both the short-run and the long-run Phillips curves to the right.
B)  the short-run Phillips curve right but leave the long-run Phillips curve unchanged.
C)  the long-run Phillips curve right but leave the short-run Phillips curve unchanged.
D)  neither the long-run Phillips curve nor the short-run Phillips curve right.E) B) and C)
F) All of the above

Question 12

By about 1973,U.S.policymakers had learned that

Accepted Answer

A)  there is no trade-off between inflation and unemployment in the short run.
B)  there is no trade-off between inflation and unemployment in the long run.
C)  Friedman's analysis of inflation and unemployment had been correct,and Phelps's analysis of inflation and unemployment had been incorrect.
D)  Phelps's analysis of inflation and unemployment had been correct,and Friedman's analysis of inflation and unemployment had been incorrect.E) A) and B)
F) A) and C)

Question 13

If expected inflation increases,which of the following shifts right?

Accepted Answer

A)  both the short-run and the long-run Phillips curves
B)  the short-run but not the long-run Phillips curve
C)  the long-run but not the short-run Phillips curve
D)  neither the long-run nor the short-run Phillips curveE) A) and D)
F) A) and B)

Question 14

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.Curve 1 is the

Accepted Answer

A)  long-run aggregate supply curve.
B)  short-run aggregate supply curve.
C)  long-run Phillips curve.
D)  short-run Phillips curve.E) A) and B)
F) A) and C)

Question 15

Friedman and Phelps concluded that

Accepted Answer

A)  in the long run the Phillips curve is downward sloping,which is consistent with classical theory.
B)  in the long run the Philips curve is downward sloping,which is inconsistent with classical theory.
C)  in the long run the Phillips curve is vertical,which is consistent with classical theory.
D)  in the long run the Phillips curve is vertical,which is inconsistent with classical theory.E) All of the above
F) A) and C)

Question 16

In the long run,an increase in the money supply growth rate

Accepted Answer

A)  shifts both the long-run and the short-run Phillips curves right.
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)  None of the above is correct.E) A) and C)
F) None of the above

Question 17

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 D)

Question 18

Other things the same,if there is an increase in the money supply growth rate that is larger than expected,then in the short run

Accepted Answer

A)  the natural rate of unemployment rises.
B)  the natural rate of unemployment falls.
C)  the unemployment rate will be above its natural rate.
D)  the unemployment rate will be below its natural rate.E) A) and D)
F) C) and D)

Question 19

In the long run,if the Fed decreases the growth rate of the money supply,

Accepted Answer

A)  inflation will be lower.
B)  unemployment will be higher.
C)  real GDP will be lower.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 20

In the long run an increase in the money supply growth rate affects

Accepted Answer

A)  the inflation rate and the natural rate of unemployment.
B)  the inflation rate,but not the natural rate of unemployment.
C)  neither the inflation rate nor the natural rate of unemployment.
D)  the natural rate of unemployment,but not the inflation rate.E) C) and D)
F) All of the above

Exam 22: The Short Run Trade Off Between Inflation and Unemployment: Shifts in the Phillips Curve the Role of Expectations

Other things the same,if there is an increase in the money supply growth rate that is larger than expected,then in the short run

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In the long run an increase in the money supply growth rate affects

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Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.If the economy starts at C and the money supply growth rate decreases,in the short run the economy moves to

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A policy that raised the natural rate of unemployment would shift

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According to Friedman and Phelps's analysis of the Phillips curve,

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According to Friedman and Phelps,the unemployment rate

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Which of the following is vertical?

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If unemployment is above its natural rate,what happens to move the economy to long-run equilibrium?

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By about 1973,U.S.policymakers had learned that

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The idea that the long-run Phillips curve is

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Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.Curve 1 is the

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In the long run,an increase in the money supply

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Friedman and Phelps concluded that

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If expected inflation increases,which of the following shifts right?

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Which of the following would shift the long-run Phillips curve to the right?

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A policy change that changes the natural rate of unemployment changes

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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 short run,an unexpected decrease in money supply growth moves the economy to

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In the long run,an increase in the money supply growth rate

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If a central bank increases the money supply growth rate,then in the short run

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In the long run,if the Fed decreases the growth rate of the money supply,

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