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

Question 2

The long-run response to a decrease in the money supply growth rate is shown by shifting

Accepted Answer

A)   the short-run and long-run Phillips curves left.
B)   the short-run and long-run Phillips curves right.
C)   only the short-run Phillips curve left.
D)   only the short-run Phillips curve right.E) All of the above
F) A) and C)

Question 3

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) A) and B)
F) A) and C)

Question 4

Figure 17-1. 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 17-1. 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) All of the above
F) B) and C)

Question 5

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Accepted Answer

A)   have higher average inflation rates than the United States.
B)   have long-run Phillips curves to the right of the United States'.
C)   may have less generous unemployment compensation or lower minimum wages.
D)   All of the above are consistent with the evidence on unemployment rates.E) A) and B)
F) C) and D)

Question 6

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

Question 7

Friedman and Phelps argued that

Accepted Answer

A)   if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run.
B)   if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run.
C)   any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations.
D)   None of the above is correct.E) All of the above
F) B) and C)

Question 8

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Accepted Answer

A)   the long run and the short run.
B)   the long run but not the short run.
C)   the short run but not the long run.
D)   neither the short run nor the long run.E) None of the above
F) A) and C)

Question 9

In the nineteenth century, some countries were on a gold standard so that on average the money supply growth rate was close to zero and expected inflation was more or less constant. For these countries during this time period, we find that increases in actual inflation were generally associated with falling unemployment. These findings

Accepted Answer

A)   are consistent with Friedman and Phelps's theories, because they argued that when inflation was higher than expected, unemployment would fall.
B)   are consistent with Friedman and Phelps's theories, because they argued that when prices rose unemployment would fall whether actual inflation was higher than expected or not.
C)   are inconsistent with Friedman and Phelps's theories, because they argued that higher inflation would increase unemployment.
D)   are inconsistent with Friedman and Phelps's theories, because they argued that inflation and unemployment are unrelated.E) B) and C)
F) All of the above

Question 10

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 curv
D)   the long-run Phillips curve, but not the long-run aggregate supply curveE) B) and D)
F) A) and C)

Question 11

The short-run Phillips curve is based on the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)   unemployment and inflation are higher.
B)   unemployment and inflation are lower.
C)   unemployment is higher and inflation is lower.
D)   unemployment is lower and inflation is higher.E) A) and C)
F) C) and D)

Question 14

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Accepted Answer

A)   both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)   inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)   inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)   inflation is lower and unemployment is the same as it was prior to the change in policy.E) B) and C)
F) A) and C)

Question 15

If inflation is greater than expected, then the unemployment rate is

Accepted Answer

A)   above the natural rate. In the long run the short-run Phillips curve will shift right.
B)   above the natural rate. In the long run the short-run Phillips curve will shift left.
C)   below the natural rate. In the long run the short-run Phillips curve will shift right.
D)   below the natural rate. In the long run the short-run Phillips curve will shift left.E) None of the above
F) All of the above

Question 16

Most economists believe that a tradeoff between inflation and unemployment exists

Accepted Answer

A)   only in the short run.
B)   only in the long run.
C)   in both the short and long run.
D)   in neither the short nor long run.E) All of the above
F) A) and D)

Question 17

Disinflation is a reduction in

Accepted Answer

A)   the price level.
B)   the inflation rate.
C)   the consumer price index.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 18

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.E) B) and D)
F) B) and C)

Question 19

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 20

If policymakers decrease aggregate demand, then in the short run the price level

Accepted Answer

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

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

There is a

Correct Answer
verified

The long-run response to a decrease in the money supply growth rate is shown by shifting

Correct Answer
verified

If policymakers decrease aggregate demand, then in the short run the price level

Correct Answer
verified

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct Answer
verified

Figure 17-1. 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 17-1. The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Correct Answer
verified

The short-run Phillips curve is based on the classical dichotomy.

Correct Answer
verified

Which of the following is vertical?

Correct Answer
verified

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Correct Answer
verified

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Correct Answer
verified

Disinflation is a reduction in

Correct Answer
verified

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Correct Answer
verified

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

Correct Answer
verified

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

Most economists believe that a tradeoff between inflation and unemployment exists

Correct Answer
verified

Correct Answer
verified

If inflation is greater than expected, then the unemployment rate is

Correct Answer
verified

According to Friedman and Phelps, the unemployment rate

Correct Answer
verified

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct Answer
verified

Disinflation is defined as a

Correct Answer
verified

Friedman and Phelps argued that

Correct Answer
verified

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

There is a

Correct AnswerverifiedShow Answer

The long-run response to a decrease in the money supply growth rate is shown by shifting

Correct AnswerverifiedShow Answer

If policymakers decrease aggregate demand, then in the short run the price level

Correct AnswerverifiedShow Answer

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short-run Phillips curve is based on the classical dichotomy.

Correct AnswerverifiedShow Answer

Which of the following is vertical?

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Correct AnswerverifiedShow Answer

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Correct AnswerverifiedShow Answer

Disinflation is a reduction in

Correct AnswerverifiedShow Answer

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Most economists believe that a tradeoff between inflation and unemployment exists

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If inflation is greater than expected, then the unemployment rate is

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, the unemployment rate

Correct AnswerverifiedShow Answer

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct AnswerverifiedShow Answer

Disinflation is defined as a

Correct AnswerverifiedShow Answer

Friedman and Phelps argued that

Correct AnswerverifiedShow Answer

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