Question 1

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 D)
F) B) and C)

Question 2

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 3

Figure 35-4. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis.  
-Refer to Figure 35-4. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the right-hand graph. The price level in the year 2018 is

Accepted Answer

A)   117.25.
B)   114.95.
C)   113.12.
D)   111.10.E) C) and D)
F) B) and D)

Question 4

According to the short-run Phillips curve, inflation

Accepted Answer

A)   and unemployment would fall if the policymakers decreased the money supply.
B)   would fall and unemployment would rise if policymakers decreased the money supply.
C)   and unemployment would fall if the policymakers increased the money supply.
D)   would fall and unemployment would rise if policymakers increased the money supply.E) All of the above
F) A) and D)

Question 5

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Accepted Answer

A steeper Phillips c...

Question 6

The equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) ,

Accepted Answer

A)   is the equation of the short-run Phillips curve.
B)   implies there can be no stable short-run Phillips curve.
C)   reflects the reasoning of Friedman and Phelps.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 7

In the long 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) A) and B)
F) A) and C)

Question 8

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. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Accepted Answer

A)   ask whether the shift is temporary or permanent.
B)   be concerned with how people adjust their expectations of inflation as a result of the shift.
C)   face, as well, a decision as to whether to accommodate the shock.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 9

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending.
According to the Phillips curve, in the short run these policies should have

Accepted Answer

A)   reduced inflation and unemployment.
B)   raised inflation and unemployment.
C)   reduced inflation and raised unemployment.
D)   raised inflation and reduced unemployment.E) B) and D)
F) A) and B)

Question 10

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Accepted Answer

A) True 
 B)False

Question 11

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

Accepted Answer

Continued higher money supply growth rai...

Question 12

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

Question 13

Which of the following is correct if there is a favorable supply shock?

Accepted Answer

A)   the short-run aggregate supply curve and the short-run Phillips curve both shift right.
B)   the short-run aggregate supply curve and the short-run Phillips curve both shift left.
C)   the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
D)   the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.E) B) and C)
F) None of the above

Question 14

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Prime Minister Emma Bigshot urges passage of a bill to reduce unemployment benefits from very generous levels in her country. She also urges her country's central bank to raise the rate at which the money supply is increasing. In the long run which, if either, of these policies will reduce the unemployment rate?

Accepted Answer

A)   both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing
B)   reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing
C)   raising the rate at which the money supply is increasing, but not reducing the generosity of unemployment benefits
D)   neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasingE) All of the above
F) A) and B)

Question 17

When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the short run?

Accepted Answer

A)   Short-run aggregate supply decreases.
B)   The natural rate of unemployment increases.
C)   The price level increases more rapidly.
D)   The money supply increases less rapidly.E) A) and B)
F) A) and C)

Question 18

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Accepted Answer

A)   Teresa reads in the newspaper that the central bank recently raised the money supply.
B)   Jackie gets fewer job offers.
C)   Miguel makes larger increases in the prices at his health food store.
D)   Julie's nominal wage increase is larger.E) B) and C)
F) None of the above

Question 19

If the Fed wants to reverse the effects of a favorable supply shock on unemployment, it should

Accepted Answer

A)   increase the money supply growth rate which raises the inflation rate.
B)   increase the money supply growth rate which reduces the inflation rate.
C)   decrease the money supply growth rate which raises the inflation rate.
D)   decrease the money supply growth rate which reduces the inflation rate.E) None of the above
F) A) and B)

Question 20

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Accepted Answer

A)   short run, and the natural rate is constant over time.
B)   long run, and the natural rate is constant over time.
C)   short run, and the natural rate changes over time.
D)   long run, and the natural rate changes over time.E) B) and C)
F) C) and D)

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

In the long run, policy that changes aggregate demand changes

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) ,

Correct Answer
verified

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. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Correct Answer
verified

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Correct Answer
verified

According to the short-run Phillips curve, inflation

Correct Answer
verified

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Correct Answer
verified

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

Correct Answer
verified
Continued higher money supply growth rai...
View Answer

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct Answer
verified

When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the short run?

Correct Answer
verified

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

Correct Answer
verified

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Correct Answer
verified
A steeper Phillips c...
View Answer

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Correct Answer
verified

Which of the following is correct if there is a favorable supply shock?

Correct Answer
verified

Correct Answer
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Correct Answer
verified

If the Fed wants to reverse the effects of a favorable supply shock on unemployment, it should

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 decreases, in the short run the economy moves to

Correct Answer
verified

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Correct Answer
verified

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

In the long run, policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) ,

Correct AnswerverifiedShow Answer

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. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Correct AnswerverifiedShow Answer

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Correct AnswerverifiedShow Answer

According to the short-run Phillips curve, inflation

Correct AnswerverifiedShow Answer

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Correct AnswerverifiedShow Answer

A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.

Correct AnswerverifiedContinued higher money supply growth rai...View AnswerShow Answer

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct AnswerverifiedShow Answer

When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the short run?

Correct AnswerverifiedShow Answer

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

Correct AnswerverifiedShow Answer

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Correct AnswerverifiedA steeper Phillips c...View AnswerShow Answer

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Correct AnswerverifiedShow Answer

Which of the following is correct if there is a favorable supply shock?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Fed wants to reverse the effects of a favorable supply shock on unemployment, it should

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 decreases, in the short run the economy moves to

Correct AnswerverifiedShow Answer

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Correct AnswerverifiedShow Answer

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Continued higher money supply growth rai...
View Answer

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Correct Answer
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A steeper Phillips c...
View Answer

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