Question 1

If there is an increase in the price of oil, then

Accepted Answer

A)   unemployment rises. If the central bank tries to counter this increase, inflation rises.
B)   unemployment rises. If the central bank tries to counter this increase, inflation falls.
C)   unemployment falls. If the central bank tries to counter this decrease, inflation falls.
D)   unemployment falls. If the central bank tries to counter this decrease, inflation rises.E) B) and D)
F) A) and B)

Question 2

In the long run, which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)   an increase in the minimum wage
B)   an increase in government spending
C)   an increase in the money supply
D)   a decrease in the money supplyE) B) and C)
F) A) and C)

Question 3

The long-run response to an increase in the growth rate of the money supply 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) A) and B)
F) A) and C)

Question 4

Figure 35-9. 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 35-9. Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

Accepted Answer

A)   a reduction in firms' costs of production
B)   a reduction in taxes on consumers
C)   an increase in the price level
D)   an increase in the world price of oilE) A) and B)
F) B) and C)

Question 5

If an increase in inflation permanently reduced unemployment, then

Accepted Answer

A)   money would not be neutral and the long-run Phillips curve would slope upward.
B)   money would not be neutral and the long-run Phillips curve would slope downward.
C)   money would be neutral and the long-run Phillips curve would slope upward.
D)   money would be neutral and the long-run Phillips curve would slope downward.E) All of the above
F) B) and C)

Question 6

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Accepted Answer

A)   established a lot of credibility in its commitment to keep inflation at about 2 percent.
B)   established a lot of credibility in its commitment to keep inflation at about 5 percent.
C)   failed to establish significant credibility in its announced intent to keep inflation at about 2 percent.
D)   failed to establish significant credibility in its announced intent to keep inflation at about 5 percent.E) A) and D)
F) B) and D)

Question 7

If unemployment is below 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) A) and B)
F) B) and C)

Question 8

Monetary Policy in Flosserland
In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%. Suppose that the public had expected that the Department of Finance would reduce inflation, but only to 20%. Then

Accepted Answer

A)   unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation.
B)   unemployment falls, but it would have fallen more if people had been expecting 22% inflation.
C)   unemployment rises, but it would have risen more if people had been expecting 12.5% inflation.
D)   unemployment rises, but it would have risen more if people had been expecting 22% inflation.E) A) and D)
F) B) and D)

Question 9

Which of the following would cause the price level to rise and output to fall in the short run?

Accepted Answer

A)   an increase in the money supply
B)   a decrease in the money supply
C)   an adverse supply shock
D)   a favorable supply shockE) A) and B)
F) A) and C)

Question 10

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Accepted Answer

A)   is greater than expected inflation.
B)   is less than expected inflation.
C)   equals expected inflation.
D)   low whether its greater than or less than expected.E) A) and B)
F) All of the above

Question 11

What does the natural-rate hypothesis claim?

Accepted Answer

That eventually unem...

Question 12

In the long run, inflation

Accepted Answer

A)   and unemployment are primarily determined by labor market factors.
B)   and unemployment are primarily determined by the rate of money supply growth.
C)   is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors.
D)   is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.E) A) and B)
F) All of the above

Question 13

What is meant by accommodation?

Accepted Answer

A central bank is said to acco...

Question 14

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 increases, in the long run the economy

Accepted Answer

A)   stays at C.
B)   moves to B.
C)   moves to F.
D)   None of the above is consistent wit an increase in the money supply growth rate.E) All of the above
F) C) and D)

Question 15

A favorable supply shock shifts the short-run Phillips curve

Accepted Answer

A)   right and inflation rises.
B)   right and inflation falls.
C)   left and inflation rises.
D)   left and inflation falls.E) B) and C)
F) A) and C)

Question 16

According to classical macroeconomic theory, in the long run

Accepted Answer

A)   monetary growth affects both real and nominal variables.
B)   the only real variable affected by monetary growth is the unemployment rate.
C)   a number of factors that affect unemployment are influenced by monetary growth.
D)   monetary growth affects nominal but not real variables.E) All of the above
F) A) and B)

Question 17

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Accepted Answer

A)   consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation.
B)   consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation.
C)   inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation.
D)   inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation.E) A) and C)
F) B) and D)

Question 18

Suppose that the money supply increases. In the short run, this increases prices according to

Accepted Answer

A)   both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B)   neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C)   the short-run Phillips curve, but not according to the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.E) A) and D)
F) B) and C)

Question 19

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Accepted Answer

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

Question 20

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Accepted Answer

The econom...

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

Correct Answer
verified

Which of the following would cause the price level to rise and output to fall in the short run?

Correct Answer
verified

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Correct Answer
verified

What is meant by accommodation?

Correct Answer
verified
A central bank is said to acco...
View Answer

In the long run, inflation

Correct Answer
verified

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

Correct Answer
verified

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 increases, in the long run the economy

Correct Answer
verified

What does the natural-rate hypothesis claim?

Correct Answer
verified
That eventually unem...
View Answer

Correct Answer
verified

If there is an increase in the price of oil, then

Correct Answer
verified

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Correct Answer
verified

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Correct Answer
verified

Suppose that the money supply increases. In the short run, this increases prices according to

Correct Answer
verified

According to classical macroeconomic theory, in the long run

Correct Answer
verified

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Correct Answer
verified

A favorable supply shock shifts the short-run Phillips curve

Correct Answer
verified

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Correct Answer
verified

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct Answer
verified

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Correct Answer
verified
The econom...
View Answer

If an increase in inflation permanently reduced unemployment, then

Correct Answer
verified

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

Correct AnswerverifiedShow Answer

Which of the following would cause the price level to rise and output to fall in the short run?

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Correct AnswerverifiedShow Answer

What is meant by accommodation?

Correct AnswerverifiedA central bank is said to acco...View AnswerShow Answer

In the long run, inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 increases, in the long run the economy

Correct AnswerverifiedShow Answer

What does the natural-rate hypothesis claim?

Correct AnswerverifiedThat eventually unem...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If there is an increase in the price of oil, then

Correct AnswerverifiedShow Answer

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Correct AnswerverifiedShow Answer

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Correct AnswerverifiedShow Answer

Suppose that the money supply increases. In the short run, this increases prices according to

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory, in the long run

Correct AnswerverifiedShow Answer

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Correct AnswerverifiedShow Answer

A favorable supply shock shifts the short-run Phillips curve

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Correct AnswerverifiedShow Answer

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Correct AnswerverifiedThe econom...View AnswerShow Answer

If an increase in inflation permanently reduced unemployment, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A central bank is said to acco...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
That eventually unem...
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The econom...
View Answer

Correct Answer
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