Question 1

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

Question 2

A decrease in expected inflation shifts

Accepted Answer

A)   the long-run Phillips curve left.
B)   the short-run Phillips curve left.
C)   neither the short-run nor long-run Phillips curve left.
D)   both the short-run and long-run Phillips curve left.E) A) and B)
F) A) and C)

Question 3

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A)   an increase in the natural rate of unemployment or expansionary monetary policy.
B)   expansionary monetary policy, but not an increase in the natural rate of unemployment.
C)   an increase in the natural rate of unemployment or a contractionary monetary policy.
D)   contractionary monetary policy, but not an increase in the natural rate of unemployment.E) B) and D)
F) B) and C)

Question 4

If policymakers expand aggregate demand, then in the long run

Accepted Answer

A)   prices will be higher and unemployment will be lower.
B)   prices will be higher and unemployment will be unchanged.
C)   prices and unemployment will be unchanged.
D)   None of the above is correct.E) B) and D)
F) C) and D)

Question 5

In the equation, Unemployment rate = Natural rate of unemployment - a  ×	imes× ctual inflation - Expected inflation) ,
The variable a is a parameter that measures how much

Accepted Answer

A)   actual inflation responds to expected inflation.
B)   expected inflation responds to actual inflation.
C)   the natural rate of unemployment responds to unexpected inflation.
D)   actual unemployment responds to unexpected inflation. E) A) and B)
F) All of the above

Question 6

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. What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   employment
D)   outputE) All of the above
F) B) and D)

Question 7

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

Accepted Answer

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

Question 8

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) None of the above
F) All of the above

Question 9

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

Accepted Answer

A)   raises expected inflation so the short-run Phillips curve shifts right.
B)   raises expected inflation so the short-run Phillips curve shifts left.
C)   reduces expected inflation so the short-run Phillips curve shifts left.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 10

In the United States during the 1970s, expected inflation

Accepted Answer

A)   rose substantially.
B)   rose slightly.
C)   fell slightly.
D)   fell substantially.E) None of the above
F) All of the above

Question 11

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

Accepted Answer

A) True 
 B)False

Question 12

A favorable supply shock will shift short-run aggregate supply

Accepted Answer

A)   left, making output rise.
B)   left, making output fall.
C)   right, making output rise.
D)   right, making output fall.E) C) and D)
F) None of the above

Question 13

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 14

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Accepted Answer

A)   higher unemployment and lower inflation
B)   lower unemployment and higher inflation
C)   higher unemployment and the same level of inflation
D)   lower unemployment and the same level of inflationE) None of the above
F) A) and C)

Question 15

A. W. Phillips' findings were based on data

Accepted Answer

A)   from 1861-1957 for the United Kingdom.
B)   from 1861-1957 for the United States.
C)   mostly from the post-World War II period in the United Kingdom.
D)   mostly from the post-World War II period in the United States.E) B) and D)
F) B) and C)

Question 16

During the mid and last part of the 1990's both inflation and unemployment were low. In general this could have been the result of

Accepted Answer

A)   adverse supply shocks that shifted the short-run Phillips curve left.
B)   adverse supply shocks that shifted the short-run Phillips curve right.
C)   favorable supply shocks that shifted the short-run Phillips curve left.
D)   favorable supply shocks that shifted the short-run Phillips curve right.E) B) and C)
F) None of the above

Question 17

Other things the same, if the central bank decreases the rate at which it increases the money supply, then

Accepted Answer

A)   unemployment and inflation rise in the short run.
B)   unemployment rises and inflation falls in the short run.
C)   unemployment falls and inflation rises in the short run.
D)   unemployment and inflation fall in the short run.E) A) and D)
F) A) and B)

Question 18

In the short run, policy that changes aggregate demand changes

Accepted Answer

A)   both unemployment and the price level.
B)   neither unemployment nor the price level.
C)   only unemployment.
D)   only the price level.E) B) and C)
F) C) and D)

Question 19

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

Question 20

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Accepted Answer

A)   above its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment.
B)   above its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.
C)   below its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment.
D)   below its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.E) C) and D)
F) B) and D)

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

If policymakers expand aggregate demand, then in the long run

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

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Other things the same, if the central bank decreases the rate at which it increases the money supply, then

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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. What is measured along the horizontal axis of the left-hand graph?

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A movement to the right along a given short-run Phillips curve could be caused by

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In the United States during the 1970s, expected inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

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

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If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is

Correct AnswerverifiedShow Answer

During the mid and last part of the 1990's both inflation and unemployment were low. In general this could have been the result of

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A. W. Phillips' findings were based on data

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Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Although monetary policy cannot reduce the natural rate of unemployment, other types of government policies can.

Correct AnswerverifiedShow Answer

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

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A decrease in expected inflation shifts

Correct AnswerverifiedShow Answer

In the equation, Unemployment rate = Natural rate of unemployment - a ×\times× ctual inflation - Expected inflation) , The variable a is a parameter that measures how much

Correct AnswerverifiedShow Answer

In the short run, policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

A favorable supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

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In the equation, Unemployment rate = Natural rate of unemployment - a $\times$ ctual inflation - Expected inflation) , The variable a is a parameter that measures how much

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