Question 1

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Accepted Answer

A)   both the long-run Phillips curve and the long-run aggregate supply curve
B)   the long-run Phillips curve but not the long-run aggregate supply curve
C)   the long-run aggregate supply curve but not the long-run Phillips curve
D)   neither the long-run Phillips curve nor the long-run aggregate supply curveE) B) and C)
F) A) and B)

Question 2

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 3

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

Question 4

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 B)
F) B) and C)

Question 5

A central bank disinflates. Output is 4% less for one year, 3% less the next year, and 2% less the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Accepted Answer

9/2 = 4.5

Question 6

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Accepted Answer

A)   of accommodative monetary policy.
B)   of disinflation.
C)   that was designed to reduce the unemployment rate.
D)   that produced results that were clearly consistent with those predicted by rational-expectations theorists.E) C) and D)
F) A) and D)

Question 7

Figure 35-7
Use the two graphs in the diagram to answer the following questions.
  
-Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Accepted Answer

A)   A and 1.
B)   back to C and 3.
C)   D and 4.
D)   F and 5.E) A) and B)
F) A) and C)

Question 8

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) None of the above
F) B) and D)

Question 9

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Accepted Answer

A)   moving to the right along the short-run Phillips curve.
B)   moving to the left along the short-run Phillips curve.
C)   shifting the short-run Phillips curve right.
D)   shifting the short-run Phillips curve left.E) B) and C)
F) C) and D)

Question 10

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

Accepted Answer

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

Question 11

As an economist working for a U.S. government agency you determine that a particular country has a sacrifice ratio of 3. Policy-makers in that country are thinking of lowering the inflation rate from 10% to 4%. Is this sacrifice ratio higher or lower than the typical estimate? From your numbers, what is the amount of output that will be lost for this country to reduce its inflation rate?

Accepted Answer

A)   The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual output to reach the new inflation target.
B)   The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual output to reach the new inflation target.
C)   The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output to reach the new inflation target.
D)   The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual output to reach the new inflation target.E) C) and D)
F) B) and C)

Question 12

The experience of the Volcker disinflation of the early 1980s

Accepted Answer

A)   generally increased estimates of the sacrifice ratio.
B)   generally decreased estimates of the sacrifice ratio.
C)   clearly refuted the predictions of the proponents of rational expectations.
D)   clearly refuted the predictions of the opponents of rational expectations.E) A) and B)
F) A) and C) B

Question 13

Which of the following statements is correct?

Accepted Answer

A)   In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated problems.
B)   Inflation and unemployment are positively related in the short run and in the long run.
C)   In the short run, unemployment and inflation are negatively related. In the long run they are largely unrelated problems.
D)   Inflation and unemployment are negatively related in the short run and in the long run.E) B) and C)
F) All of the above

Question 14

Suppose that the Prime Minister and Parliament of Veridian are disappointed with the high inflation rates under the current system where the Veridian Ministry of Finance is in charge of the money supply. They make reforms to lower inflation from its current rate of 8%. Suppose further that the public is confident that with the reforms in place that inflation will fall to 2%. Also suppose that those in control of the money supply actually conduct monetary policy so that the actual inflation rate is 4%. Using long-run and short-run Phillips curves and assuming the natural rate of unemployment is 6%, show the initial long run equilibrium of Veridian and label it "A". Assuming that the government had actually set inflation at 2% and that the public believed this, label the long­run equilibrium "B". Now, suppose that inflation expectations fell to 2% and that the government unexpectedly created inflation of 4%. Show the short­run equilibrium and label it "C". If the money supply continues to grow at a rate consistent with 4% inflation, show where the economy ends up and label that point "D".

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Veridian ...

Question 15

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Accepted Answer

A)   the natural rate of unemployment and monetary growth.
B)   the natural rate of unemployment, but not monetary growth.
C)   monetary growth, but not the natural rate of unemployment.
D)   neither monetary growth nor the natural rate of unemployment.E) A) and B)
F) B) and C)

Question 16

In the long run, an increase in the money supply

Accepted Answer

A)   leaves prices and unemployment unchanged.
B)   raises prices and unemployment.
C)   raises prices and leaves unemployment unchanged.
D)   leaves prices unchanged and reduces unemployment.E) A) and B)
F) A) and D)

Question 17

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

Question 18

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) None of the above

Question 19

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Accepted Answer

A)   the short-run and the long run Phillips curves
B)   the short-run but not the long run Phillips curve
C)   the long-run but not the short-run Phillips curve
D)   neither the short-run nor the long-run Phillips curvesE) A) and D)
F) All of the above

Question 20

By raising aggregate demand more than anticipated, policymakers

Accepted Answer

A)   reduce unemployment for awhile.
B)   raise unemployment for awhile.
C)   reduce unemployment permanently.
D)   None of the above is correct.E) B) and C)
F) All of the above

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

If more firms chose to pay efficiency wages, which of the following would shift to the right?

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

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

Correct Answer
verified

A central bank disinflates. Output is 4% less for one year, 3% less the next year, and 2% less the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Correct Answer
verified
9/2 = 4.5

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Correct Answer
verified

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

Correct Answer
verified

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Correct Answer
verified

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

Correct Answer
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B

Correct Answer
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The experience of the Volcker disinflation of the early 1980s

Correct Answer
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B

Which of the following statements is correct?

Correct Answer
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Correct Answer
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Veridian ...
View Answer

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct Answer
verified

In the long run, an increase in the money supply

Correct Answer
verified

According to the short-run Phillips curve, inflation

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

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Correct Answer
verified

By raising aggregate demand more than anticipated, policymakers

Correct Answer
verified

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

If more firms chose to pay efficiency wages, which of the following would shift to the right?

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

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

Correct AnswerverifiedShow Answer

A central bank disinflates. Output is 4% less for one year, 3% less the next year, and 2% less the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Correct Answerverified9/2 = 4.5

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

Correct AnswerverifiedShow Answer

The experience of the Volcker disinflation of the early 1980s

Correct AnswerverifiedB

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct Answerverified Veridian ...View AnswerShow Answer

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct AnswerverifiedShow Answer

In the long run, an increase in the money supply

Correct AnswerverifiedShow Answer

According to the short-run Phillips curve, inflation

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

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Correct AnswerverifiedShow Answer

By raising aggregate demand more than anticipated, policymakers

Correct AnswerverifiedShow Answer

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9/2 = 4.5

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B

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B

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Veridian ...
View Answer

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