Question 1

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

List one specific policy that would shift the long-run Phillips curve to the right.

Accepted Answer

More generous unempl...

Question 3

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

Accepted Answer

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

Question 4

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to The Economy in 2008. In the short-run the effects of the housing and financial crises

Accepted Answer

A)   raise both inflation and the unemployment rate.
B)   raise the inflation rate and reduce the unemployment rate.
C)   reduce the inflation rate and raise the unemployment rate.
D)   reduce both the inflation rate and the unemployment rate.E) A) and C)
F) All of the above

Question 5

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Accepted Answer

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

Question 6

In the long run,

Accepted Answer

A)   the natural rate of unemployment depends primarily on the level of aggregate demand.
B)   inflation depends primarily upon the money supply growth rate.
C)   there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 7

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Accepted Answer

A)   aggregate demand to the right.
B)   aggregate demand to the left.
C)   aggregate supply to the right.
D)   aggregate supply to the left.E) B) and C)
F) None of the above

Question 8

A favorable supply shock causes output to

Accepted Answer

A)   rise. To counter this a central bank would increase the money supply.
B)   rise. To counter this a central bank would decrease the money supply.
C)   fall. To counter this a central bank would increase the money supply.
D)   fall. To counter this a central bank would decrease the money supply.E) B) and C)
F) None of the above

Question 9

Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?

Accepted Answer

A)   Inflation is reduced from 4 percent to 1 percent, and annual output falls by 10 percent.
B)   Inflation is reduced from 6 percent to 4 percent, and annual output falls by 10 percent.
C)   Inflation is reduced from 8 percent to 5 percent, and annual output falls by 9 percent.
D)   Inflation is reduced from 3 percent to 2 percent, and annual output falls by 3 percent.E) A) and D)
F) A) and C)

Question 10

When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation

Accepted Answer

A)   increases and unemployment increases.
B)   increases and unemployment decreases.
C)   decreases and unemployment increases.
D)   decreases and unemployment decreases.E) All of the above
F) A) and C)

Question 11

If consumption expenditures fall, then in the short run

Accepted Answer

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

Question 12

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

A)   downward pressures on prices and wages.
B)   downward pressures on prices and upward pressures on wages.
C)   upward pressures on prices and downward pressures on wages.
D)   upward pressures on prices and wages.E) B) and D)
F) B) and C)

Question 13

If there is a decline in business confidence and the Fed desires to return unemployment towards its natural rate, what should it do? If business confidence eventually returns to normal but the Fed does not reverse its policy, what eventually happens to the inflation rate?

Accepted Answer

Increase the money s...

Question 14

Which of the following results in higher inflation and higher unemployment in the short run?

Accepted Answer

A)   a more expansionary monetary policy
B)   a more contractionary monetary policy
C)   a decrease in the minimum wage
D)   an adverse supply shock such as an increase in the price of oilE) All of the above
F) None of the above

Question 15

If the central bank increases the money supply, in the short run, the price level

Accepted Answer

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

Question 16

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

Question 17

In the long run, a decrease 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) All of the above
F) B) and D)

Question 18

If the central bank increases the money supply, then in the short run prices

Accepted Answer

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

Question 19

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

Question 20

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Accepted Answer

A)   it seemed to work for wages but not for inflation.
B)   monetary policy was ineffective in combating inflation.
C)   the Phillips curve did not apply in the long run.
D)   Phillips had made errors in collecting his data.E) All of the above
F) C) and D)

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

If the central bank increases the money supply, in the short run, the price level

Correct AnswerverifiedShow Answer

In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct AnswerverifiedShow Answer

If there is a decline in business confidence and the Fed desires to return unemployment towards its natural rate, what should it do? If business confidence eventually returns to normal but the Fed does not reverse its policy, what eventually happens to the inflation rate?

Correct AnswerverifiedIncrease the money s...View AnswerShow Answer

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

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Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?

Correct AnswerverifiedShow Answer

In the long run,

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The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. In the short-run the effects of the housing and financial crises

Correct AnswerverifiedShow Answer

A favorable supply shock causes output to

Correct AnswerverifiedShow Answer

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the central bank increases the money supply, then in the short run prices

Correct AnswerverifiedShow Answer

In the long run, a decrease in the money supply growth rate

Correct AnswerverifiedShow Answer

When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation

Correct AnswerverifiedShow Answer

Which of the following results in higher inflation and higher unemployment in the short run?

Correct AnswerverifiedShow Answer

List one specific policy that would shift the long-run Phillips curve to the right.

Correct AnswerverifiedMore generous unempl...View AnswerShow Answer

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Correct AnswerverifiedShow Answer

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If consumption expenditures fall, then in the short run

Correct AnswerverifiedShow Answer

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

Correct AnswerverifiedShow Answer

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Increase the money s...
View Answer

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More generous unempl...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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