Question 1

Along an actual (observed) Phillips curve,

Accepted Answer

A)  aggregate output varies inversely with the unemployment rate. 
B)  aggregate output directly inversely with the inflation rate. 
C)  the inflation rate varies inversely with the unemployment rate. 
D)  the inflation rate varies directly with the unemployment rate. 
A)  aggregate output varies inversely with the unemployment rate. 
B)  aggregate output directly inversely with the inflation rate. 
C)  the inflation rate varies inversely with the unemployment rate. 
D)  the inflation rate varies directly with the unemployment rate. C

Question 2

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Accepted Answer

A) If %∆M = %∆ YP , then %∆P = %∆M. B) If %∆M > %∆ YP , then %∆P > 0. C) If %∆M > %∆ YP , then %∆P > %∆M. D) If %∆M = %∆ YP , then %∆P < 0. A) If %∆M = %∆ YP , then %∆P = %∆M. B) If %∆M > %∆ YP , then %∆P > 0. C) If %∆M > %∆ YP , then %∆P > %∆M. D) If %∆M = %∆ YP , then %∆P < 0. B

Question 3

The efficiency-wage theory holds that the market equilibrium wage is the efficient wage.

Accepted Answer

A) True 
 B)False  False

Question 4

The lowest wage that a worker would accept if offered a job is called the subsistence wage.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Accepted Answer

A)  If the growth rate in YP exceeds the money growth rate, there will be inflation. 
B)  If the money growth rate is less than the growth rate in YP, there will be deflation. 
C)  If the money supply grows at the same rate as growth in YP, the price level will grow at a constant rate. 
D)  If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP. 
A)  If the growth rate in YP exceeds the money growth rate, there will be inflation. 
B)  If the money growth rate is less than the growth rate in YP, there will be deflation. 
C)  If the money supply grows at the same rate as growth in YP, the price level will grow at a constant rate. 
D)  If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP.

Question 6

In the short run and in the long run, there is a tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 7

What is a reservation wage?

Accepted Answer

A)  It is the highest wage that an unemployed worker would accept, if it were offered. 
B)  It is the lowest wage that an unemployed worker would accept, if it were offered. 
C)  It is the highest wage that an employer will offer a potential worker if there are many candidates vying for the job. 
D)  It is the lowest wage that an unemployed worker would accept, excluding any non-pecuniary benefits. 
A)  It is the highest wage that an unemployed worker would accept, if it were offered. 
B)  It is the lowest wage that an unemployed worker would accept, if it were offered. 
C)  It is the highest wage that an employer will offer a potential worker if there are many candidates vying for the job. 
D)  It is the lowest wage that an unemployed worker would accept, excluding any non-pecuniary benefits.

Question 8

Which of the following statements is true?

Accepted Answer

A)  The aggregate demand-aggregate supply model attempts to explain the equilibrium level of real GDP and the price level. 
B)  The aggregate demand-aggregate supply model gives us inflation and the various levels of real GDP. 
C)  The inflation-unemployment relationships attempt to explain the equilibrium level of real GDP. 
D)  The inflation-unemployment phases are based on movements up and down the Phillips curve. 
A)  The aggregate demand-aggregate supply model attempts to explain the equilibrium level of real GDP and the price level. 
B)  The aggregate demand-aggregate supply model gives us inflation and the various levels of real GDP. 
C)  The inflation-unemployment relationships attempt to explain the equilibrium level of real GDP. 
D)  The inflation-unemployment phases are based on movements up and down the Phillips curve.

Question 9

In a Phillips phase, real GDP rises and inflation falls.

Accepted Answer

A) True 
 B)False

Question 10

As the duration of job search increases, there will likely be

Accepted Answer

A)  an increase in the reservation wage and an increase in the best offer received. 
B)  an increase in the reservation wage and a decrease in the best offer received. 
C)  a decrease in the reservation wage and an increase in the best offer received. 
D)  a decrease in the reservation wage and a decrease in the best offer received. 
A)  an increase in the reservation wage and an increase in the best offer received. 
B)  an increase in the reservation wage and a decrease in the best offer received. 
C)  a decrease in the reservation wage and an increase in the best offer received. 
D)  a decrease in the reservation wage and a decrease in the best offer received.

Question 11

Use the following to answer questions .
Exhibit: Inflation and Unemployment 2  
-(Exhibit: Inflation and Unemployment 2) Which of the following movements represents a recovery phase?

Accepted Answer

A)  The movement from A to B 
B)  The movement from B to C 
C)  The movement from C to D 
D)  The movement from C to B 
A)  The movement from A to B 
B)  The movement from B to C 
C)  The movement from C to D 
D)  The movement from C to B

Question 12

The Phillips phase of the inflation-unemployment relationship emerges because

Accepted Answer

A)  prices and wages are sticky. 
B)  nominal wages and prices fall. 
C)  the economy is stuck in an equilibrium below full employment. 
D)  people fully expect the price increases produced by increases in aggregate demand. 
A)  prices and wages are sticky. 
B)  nominal wages and prices fall. 
C)  the economy is stuck in an equilibrium below full employment. 
D)  people fully expect the price increases produced by increases in aggregate demand.

Question 13

In the late 1970s, the U.S. economy entered a stagflation phase characterized by

Accepted Answer

A)  unemployment below its natural rate and rising inflation 
B)  unemployment above its natural rate and rising inflation. 
C)  unemployment at its natural rate and rising inflation. 
D)  unemployment above its natural rate and constant inflation. 
A)  unemployment below its natural rate and rising inflation 
B)  unemployment above its natural rate and rising inflation. 
C)  unemployment at its natural rate and rising inflation. 
D)  unemployment above its natural rate and constant inflation.

Question 14

The critical feature of a

Accepted Answer

A)  Phillips phase is a change in unemployment and inflation in the same direction. 
B)  recovery phase is a change in inflation and unemployment in the opposite direction. 
C)  stagflation phase is a change in nominal wages and expectations. 
D)  expansion phase is a change in the rate of change in real wages and real GDP. 
A)  Phillips phase is a change in unemployment and inflation in the same direction. 
B)  recovery phase is a change in inflation and unemployment in the opposite direction. 
C)  stagflation phase is a change in nominal wages and expectations. 
D)  expansion phase is a change in the rate of change in real wages and real GDP.

Question 15

The lowest wage that a worker would accept, if offered a job, is called

Accepted Answer

A)  the reservation wage. 
B)  a subsistence wage. 
C)  the exploitation wage. 
D)  the equilibrium market wage. 
A)  the reservation wage. 
B)  a subsistence wage. 
C)  the exploitation wage. 
D)  the equilibrium market wage.

Question 16

Consider the following statement: "President X expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course.'" Which of the following could have caused this phenomenon?

Accepted Answer

A)  Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. 
B)  Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right. 
C)  Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right. 
D)  Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right. 
A)  Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. 
B)  Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right. 
C)  Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right. 
D)  Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Question 17

Suppose the full-employment level of real GDP is increasing at a rate of 3% per period and the money supply is growing at a 4% rate. Using the equation of exchange, what is the value of the long-run inflation rate, assuming constant velocity?

Accepted Answer

A)  7% 
B)  4% 
C)  1% 
D)  -1% 
A)  7% 
B)  4% 
C)  1% 
D)  -1%

Question 18

Use the following to answer questions .
Exhibit: The Inflation-Unemployment Cycle  
-(Exhibit: The Inflation-Unemployment Cycle) If the economy were experiencing a recessionary gap, it would be at the intersection of short-run aggregate supply and aggregate demand at point(s):

Accepted Answer

A)  1 only. 
B)  1 or 2. 
C)  3 only. 
D)  4. 
A)  1 only. 
B)  1 or 2. 
C)  3 only. 
D)  4.

Question 19

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%∆P)
Can be expressed as

Accepted Answer

A)  %∆P = %∆M ÷ %∆Y 
B)  %∆P = %∆M + %∆Y 
C)  %∆P = %∆M * %∆Y 
D)  %∆P = %∆M - %∆Y 
A)  %∆P = %∆M ÷ %∆Y 
B)  %∆P = %∆M + %∆Y 
C)  %∆P = %∆M * %∆Y 
D)  %∆P = %∆M - %∆Y

Question 20

In the long run, sustained inflation is due to

Accepted Answer

A)  a one-time increase in money growth. 
B)  a continuous increase in the money growth rate. 
C)  a continuous increase in aggregate demand. 
D)  the rising price of oil. 
A)  a one-time increase in money growth. 
B)  a continuous increase in the money growth rate. 
C)  a continuous increase in aggregate demand. 
D)  the rising price of oil.

Along an actual (observed) Phillips curve,

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

The efficiency-wage theory holds that the market equilibrium wage is the efficient wage.

The lowest wage that a worker would accept if offered a job is called the subsistence wage.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

In the short run and in the long run, there is a tradeoff between inflation and unemployment.

What is a reservation wage?

Which of the following statements is true?

In a Phillips phase, real GDP rises and inflation falls.

As the duration of job search increases, there will likely be

Use the following to answer questions . Exhibit: Inflation and Unemployment 2 -(Exhibit: Inflation and Unemployment 2) Which of the following movements represents a recovery phase?

The Phillips phase of the inflation-unemployment relationship emerges because

In the late 1970s, the U.S. economy entered a stagflation phase characterized by

The critical feature of a

The lowest wage that a worker would accept, if offered a job, is called

Consider the following statement: "President X expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course.'" Which of the following could have caused this phenomenon?

Suppose the full-employment level of real GDP is increasing at a rate of 3% per period and the money supply is growing at a 4% rate. Using the equation of exchange, what is the value of the long-run inflation rate, assuming constant velocity?

Use the following to answer questions . Exhibit: The Inflation-Unemployment Cycle -(Exhibit: The Inflation-Unemployment Cycle) If the economy were experiencing a recessionary gap, it would be at the intersection of short-run aggregate supply and aggregate demand at point(s):

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%∆P) Can be expressed as

In the long run, sustained inflation is due to

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 16: Inflation and Unemployment

Along an actual (observed) Phillips curve,

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

The efficiency-wage theory holds that the market equilibrium wage is the efficient wage.

The lowest wage that a worker would accept if offered a job is called the subsistence wage.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

In the short run and in the long run, there is a tradeoff between inflation and unemployment.

What is a reservation wage?

Which of the following statements is true?

In a Phillips phase, real GDP rises and inflation falls.

As the duration of job search increases, there will likely be

Use the following to answer questions . Exhibit: Inflation and Unemployment 2 -(Exhibit: Inflation and Unemployment 2) Which of the following movements represents a recovery phase?

The Phillips phase of the inflation-unemployment relationship emerges because

In the late 1970s, the U.S. economy entered a stagflation phase characterized by

The critical feature of a

The lowest wage that a worker would accept, if offered a job, is called

Consider the following statement: "President X expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course.'" Which of the following could have caused this phenomenon?

Suppose the full-employment level of real GDP is increasing at a rate of 3% per period and the money supply is growing at a 4% rate. Using the equation of exchange, what is the value of the long-run inflation rate, assuming constant velocity?

Use the following to answer questions . Exhibit: The Inflation-Unemployment Cycle -(Exhibit: The Inflation-Unemployment Cycle) If the economy were experiencing a recessionary gap, it would be at the intersection of short-run aggregate supply and aggregate demand at point(s):

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%∆P) Can be expressed as

In the long run, sustained inflation is due to

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?