Question 1

Figure 17-2  
-Refer to Figure 17-2. What is Curve 1?

Accepted Answer

A)  the long-run aggregate-supply curve 
B)  the short-run aggregate-supply curve 
C)  the long-run Phillips curve 
D)  the short-run Phillips curve 
A)  the long-run aggregate-supply curve 
B)  the short-run aggregate-supply curve 
C)  the long-run Phillips curve 
D)  the short-run Phillips curve C

Question 2

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops. What would the good weather do to the short-run aggregate-supply curve and the short-run Phillips curve?

Accepted Answer

A)  It would shift both the short-run aggregate-supply curve and the short-run Phillips curve right. 
B)  It would shift both the short-run aggregate-supply curve and the short-run Phillips curve left. 
C)  It would shift the short-run aggregate-supply curve to the right, and the short-run Phillips curve to the left. 
D)  It would shift the short-run aggregate-supply curve to the left, and the short-run Phillips curve to the right. 
A)  It would shift both the short-run aggregate-supply curve and the short-run Phillips curve right. 
B)  It would shift both the short-run aggregate-supply curve and the short-run Phillips curve left. 
C)  It would shift the short-run aggregate-supply curve to the right, and the short-run Phillips curve to the left. 
D)  It would shift the short-run aggregate-supply curve to the left, and the short-run Phillips curve to the right. C

Question 3

Which change will move the economy to a point on the Phillips curve where unemployment is lower?

Accepted Answer

A)  lower inflation 
B)  increased government spending 
C)  a decrease the money supply 
D)  increased tax rates 
A)  lower inflation 
B)  increased government spending 
C)  a decrease the money supply 
D)  increased tax rates B

Question 4

In the late 1960s, which of the following was published by economist Edmund Phelps?

Accepted Answer

A)  a paper that argued that there was no long-run tradeoff between inflation and unemployment 
B)  a paper that disproved Friedman's claim that monetary policy was ineffective in controlling inflation 
C)  a paper that showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent 
D)  a paper that argued that the Phillips curve was stable and that it would not shift 
A)  a paper that argued that there was no long-run tradeoff between inflation and unemployment 
B)  a paper that disproved Friedman's claim that monetary policy was ineffective in controlling inflation 
C)  a paper that showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent 
D)  a paper that argued that the Phillips curve was stable and that it would not shift

Question 5

Suppose that in response to an adverse aggregate supply shock, the Bank of Canada increased the money supply. What would happen to unemployment and inflation?

Accepted Answer

A)  Unemployment and inflation would both rise. 
B)  Unemployment and inflation would both fall. 
C)  Unemployment would rise and inflation would fall. 
D)  Unemployment would fall and inflation would rise. 
A)  Unemployment and inflation would both rise. 
B)  Unemployment and inflation would both fall. 
C)  Unemployment would rise and inflation would fall. 
D)  Unemployment would fall and inflation would rise.

Question 6

What will an adverse supply shock cause output and prices to do?

Accepted Answer

A)  It will cause output and prices to rise. 
B)  It will cause output and prices to fall. 
C)  It will cause output to rise and prices to fall. 
D)  It will cause output to fall and prices to rise. 
A)  It will cause output and prices to rise. 
B)  It will cause output and prices to fall. 
C)  It will cause output to rise and prices to fall. 
D)  It will cause output to fall and prices to rise.

Question 7

Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant "a" in the short-run Phillips curve equation is 0.8. Draw the long-run and short-run Phillips curves. What is the inflation rate corresponding to the intersection of the two curves?

Accepted Answer

The short-run Phillips curve is describe

Question 8

Use the AD/AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Accepted Answer

With perfect capital mobility, the centr

Question 9

Figure 17-2  
-Refer to Figure 17-2. What is Curve 2?

Accepted Answer

A)  the long-run Phillips curve 
B)  the short-run Phillips curve 
C)  the long-run aggregate-demand curve 
D)  the short-run aggregate-demand curve 
A)  the long-run Phillips curve 
B)  the short-run Phillips curve 
C)  the long-run aggregate-demand curve 
D)  the short-run aggregate-demand curve

Question 10

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie

Question 11

Which of the following best defines the sacrifice ratio?

Accepted Answer

A)  the sum of the inflation and unemployment rates 
B)  the inflation rate divided by the change in output 
C)  the number of percentage points annual output falls for each percentage point reduction in inflation 
D)  the number of percentage points unemployment rises for each percentage point reduction in inflation 
A)  the sum of the inflation and unemployment rates 
B)  the inflation rate divided by the change in output 
C)  the number of percentage points annual output falls for each percentage point reduction in inflation 
D)  the number of percentage points unemployment rises for each percentage point reduction in inflation

Question 12

In the long run, if the Bank of Canada decreases the rate at which it increases the money supply, what will happen to inflation and unemployment?

Accepted Answer

A)  Inflation and unemployment will be higher. 
B)  Inflation will be higher and unemployment will be lower. 
C)  Inflation will be lower and unemployment will be higher. 
D)  Inflation will be lower and unemployment will stay the same. 
A)  Inflation and unemployment will be higher. 
B)  Inflation will be higher and unemployment will be lower. 
C)  Inflation will be lower and unemployment will be higher. 
D)  Inflation will be lower and unemployment will stay the same.

Question 13

Figure 17-4  
-Refer to Figure 17-4. Along LRPC, what is the expected rate of inflation?

Accepted Answer

A)  0 percent 
B)  the actual rate of inflation 
C)  3 percent 
D)  the natural rate of inflation 
A)  0 percent 
B)  the actual rate of inflation 
C)  3 percent 
D)  the natural rate of inflation

Question 14

In which situation will the economy move to a point on the Phillips curve where unemployment is higher?

Accepted Answer

A)  if the inflation rate increases 
B)  if the government increases its expenditures 
C)  if the Bank of Canada decreases the money supply 
D)  if expected inflation increases 
A)  if the inflation rate increases 
B)  if the government increases its expenditures 
C)  if the Bank of Canada decreases the money supply 
D)  if expected inflation increases

Question 15

What do the data for the period of 1968 through 1973 demonstrate?

Accepted Answer

A)  that there is a short-run tradeoff between inflation and unemployment 
B)  that a supply shock can disrupt the short-run tradeoff between inflation and unemployment 
C)  that there is a long-run tradeoff between inflation and unemployment 
D)  that a demand shock can disrupt the short-run tradeoff between inflation and unemployment 
A)  that there is a short-run tradeoff between inflation and unemployment 
B)  that a supply shock can disrupt the short-run tradeoff between inflation and unemployment 
C)  that there is a long-run tradeoff between inflation and unemployment 
D)  that a demand shock can disrupt the short-run tradeoff between inflation and unemployment

Question 16

How much was the unemployment rate in Canada in 1983?

Accepted Answer

A)  about 4 percent 
B)  about 6 percent 
C)  about 8 percent 
D)  more than 10 percent 
A)  about 4 percent 
B)  about 6 percent 
C)  about 8 percent 
D)  more than 10 percent

Question 17

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

Accepted Answer

A)  Unemployment is high, so there is upward pressure on wages and prices. 
B)  Unemployment is high, so there is downward pressure on wages and prices. 
C)  Unemployment is low, so there is upward pressure on wages and prices. 
D)  Unemployment is low, so there is downward pressure on wages and prices. 
A)  Unemployment is high, so there is upward pressure on wages and prices. 
B)  Unemployment is high, so there is downward pressure on wages and prices. 
C)  Unemployment is low, so there is upward pressure on wages and prices. 
D)  Unemployment is low, so there is downward pressure on wages and prices.

Question 18

Figure 17-3  
-Refer to Figure 17-3. Starting from c and 3, where does an increase in aggregate demand move the economy to, in the short run and the long run?

Accepted Answer

A)  a and 1 in the short run, b and 2 in the long run 
B)  b and 2 in the short run, a and 1 in the long run 
C)  d and 4 in the short run, e and 5 in the long run 
D)  d and 2 in the short run, a and 5 in the long run 
A)  a and 1 in the short run, b and 2 in the long run 
B)  b and 2 in the short run, a and 1 in the long run 
C)  d and 4 in the short run, e and 5 in the long run 
D)  d and 2 in the short run, a and 5 in the long run

Question 19

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

Accepted Answer

A)  It will shift the short-run Phillips curve right and raise inflation. 
B)  It will shift the short-run Phillips curve right and lower inflation. 
C)  It will shift the short-run Phillips curve left and raise inflation. 
D)  It will shift the short-run Phillips curve left and lower inflation. 
A)  It will shift the short-run Phillips curve right and raise inflation. 
B)  It will shift the short-run Phillips curve right and lower inflation. 
C)  It will shift the short-run Phillips curve left and raise inflation. 
D)  It will shift the short-run Phillips curve left and lower inflation.

Question 20

What happened to aggregate supply and the Phillips curve in the mid- and late 1990s?

Accepted Answer

A)  Aggregate supply and the Phillips curve shifted right. 
B)  Aggregate supply and the Phillips curve shifted left. 
C)  Aggregate supply shifted right and the Phillips curve shifted left. 
D)  Aggregate supply shifted left and the Phillips curve shifted right. 
A)  Aggregate supply and the Phillips curve shifted right. 
B)  Aggregate supply and the Phillips curve shifted left. 
C)  Aggregate supply shifted right and the Phillips curve shifted left. 
D)  Aggregate supply shifted left and the Phillips curve shifted right.

Figure 17-2 -Refer to Figure 17-2. What is Curve 1?

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops. What would the good weather do to the short-run aggregate-supply curve and the short-run Phillips curve?

Which change will move the economy to a point on the Phillips curve where unemployment is lower?

In the late 1960s, which of the following was published by economist Edmund Phelps?

Suppose that in response to an adverse aggregate supply shock, the Bank of Canada increased the money supply. What would happen to unemployment and inflation?

What will an adverse supply shock cause output and prices to do?

Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant "a" in the short-run Phillips curve equation is 0.8. Draw the long-run and short-run Phillips curves. What is the inflation rate corresponding to the intersection of the two curves?

Use the AD/AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Figure 17-2 -Refer to Figure 17-2. What is Curve 2?

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Which of the following best defines the sacrifice ratio?

In the long run, if the Bank of Canada decreases the rate at which it increases the money supply, what will happen to inflation and unemployment?

Figure 17-4 -Refer to Figure 17-4. Along LRPC, what is the expected rate of inflation?

In which situation will the economy move to a point on the Phillips curve where unemployment is higher?

What do the data for the period of 1968 through 1973 demonstrate?

How much was the unemployment rate in Canada in 1983?

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

Figure 17-3 -Refer to Figure 17-3. Starting from c and 3, where does an increase in aggregate demand move the economy to, in the short run and the long run?

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

What happened to aggregate supply and the Phillips curve in the mid- and late 1990s?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

Five Debates Over Macroeconomic Policy

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

Figure 17-2 -Refer to Figure 17-2. What is Curve 1?

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops. What would the good weather do to the short-run aggregate-supply curve and the short-run Phillips curve?

Which change will move the economy to a point on the Phillips curve where unemployment is lower?

In the late 1960s, which of the following was published by economist Edmund Phelps?

Suppose that in response to an adverse aggregate supply shock, the Bank of Canada increased the money supply. What would happen to unemployment and inflation?

What will an adverse supply shock cause output and prices to do?

Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant "a" in the short-run Phillips curve equation is 0.8. Draw the long-run and short-run Phillips curves. What is the inflation rate corresponding to the intersection of the two curves?

Use the AD/AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Figure 17-2 -Refer to Figure 17-2. What is Curve 2?

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Which of the following best defines the sacrifice ratio?

In the long run, if the Bank of Canada decreases the rate at which it increases the money supply, what will happen to inflation and unemployment?

Figure 17-4 -Refer to Figure 17-4. Along LRPC, what is the expected rate of inflation?

In which situation will the economy move to a point on the Phillips curve where unemployment is higher?

What do the data for the period of 1968 through 1973 demonstrate?

How much was the unemployment rate in Canada in 1983?

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

Figure 17-3 -Refer to Figure 17-3. Starting from c and 3, where does an increase in aggregate demand move the economy to, in the short run and the long run?

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

What happened to aggregate supply and the Phillips curve in the mid- and late 1990s?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

Five Debates Over Macroeconomic Policy

Filters