Question 1

Figure 17-4  
-Refer to Figure 17-4. At point m, how do actual and expected inflation rates and unemployment rates compare?

Accepted Answer

A)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
B)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment. 
C)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
D)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment. 
A)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
B)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment. 
C)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
D)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment.

Question 2

Who is a leading economist in the theory of rational expectations?

Accepted Answer

A)  John Maynard Keynes 
B)  Robert Solow 
C)  William Phillips 
D)  Thomas Sargent 
A)  John Maynard Keynes 
B)  Robert Solow 
C)  William Phillips 
D)  Thomas Sargent

Question 3

In 1980, what was the Canadian inflation rate and unemployment rate?

Accepted Answer

A)  The inflation rate was about 2 percent, and the unemployment rate was about 8 percent. 
B)  The inflation rate was about 6 percent, and the unemployment rate was about 2 percent. 
C)  The inflation rate was about 7 percent, and the unemployment rate was about 10 percent. 
D)  The inflation rate was about 10 percent, and the unemployment rate was about 7 percent. 
A)  The inflation rate was about 2 percent, and the unemployment rate was about 8 percent. 
B)  The inflation rate was about 6 percent, and the unemployment rate was about 2 percent. 
C)  The inflation rate was about 7 percent, and the unemployment rate was about 10 percent. 
D)  The inflation rate was about 10 percent, and the unemployment rate was about 7 percent.

Question 4

Suppose the long-run Phillips curve shifts to the right. For any given rate of money growth and inflation, how would unemployment and output change?

Accepted Answer

A)  Unemployment would be higher, and output would be lower. 
B)  Unemployment would be higher, and output would be higher. 
C)  Unemployment would be lower, and output would be lower. 
D)  Unemployment would be lower, and output would be higher. 
A)  Unemployment would be higher, and output would be lower. 
B)  Unemployment would be higher, and output would be higher. 
C)  Unemployment would be lower, and output would be lower. 
D)  Unemployment would be lower, and output would be higher.

Question 5

Which theory proposes that people optimally use all available information when forecasting the future?

Accepted Answer

A)  rational expectations 
B)  perfect expectations 
C)  momentum expectations 
D)  policy expectations 
A)  rational expectations 
B)  perfect expectations 
C)  momentum expectations 
D)  policy expectations

Question 6

Which of the following data supported A.W. Phillips' findings?

Accepted Answer

A)  data from 1861-1957 for the United Kingdom 
B)  data from 1861-1957 for the United States 
C)  data mostly from the post-World War II period in the United Kingdom 
D)  data mostly from the post-World War II period in the United States 
A)  data from 1861-1957 for the United Kingdom 
B)  data from 1861-1957 for the United States 
C)  data mostly from the post-World War II period in the United Kingdom 
D)  data mostly from the post-World War II period in the United States

Question 7

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Accepted Answer

A)  0 
B)  2 
C)  4 
D)  6 
A)  0 
B)  2 
C)  4 
D)  6

Question 8

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve (that is, to increase inflation and reduce unemployment)? Were they right or wrong?

Accepted Answer

Friedman and Phelps predicted that, over

Question 9

Figure 17-2  
-Refer to Figure 17-2. Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

Accepted Answer

A)  b 
B)  d 
C)  e 
D)  a 
A)  b 
B)  d 
C)  e 
D)  a

Question 10

In 1980, how did the Canadian misery index compare to the average?

Accepted Answer

A)  It was much higher than average. 
B)  It was slightly higher than average. 
C)  It was just below average. 
D)  It was well below average. 
A)  It was much higher than average. 
B)  It was slightly higher than average. 
C)  It was just below average. 
D)  It was well below average.

Question 11

Suppose that the Bank of Canada unexpectedly decreases the money supply. What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Accepted Answer

In the short run, unemployment will rise

Question 12

Suppose the Bank of Canada decreased the growth rate of the money supply. What would permanently decrease?

Accepted Answer

A)  the growth rate of GDP 
B)  the unemployment rate 
C)  the inflation rate 
D)  the price level 
A)  the growth rate of GDP 
B)  the unemployment rate 
C)  the inflation rate 
D)  the price level

Question 13

If the Bank of Canada announced a policy to reduce inflation and people found it credible, what would happen to the short-run Phillips curve and the sacrifice ratio?

Accepted Answer

A)  The short-run Phillips curve would shift right, and the sacrifice ratio would fall. 
B)  The short-run Phillips curve would shift right, and the sacrifice ratio would rise. 
C)  The short-run Phillips curve would shift left, and the sacrifice ratio would fall. 
D)  The short-run Phillips curve would shift left, and the sacrifice ratio would rise. 
A)  The short-run Phillips curve would shift right, and the sacrifice ratio would fall. 
B)  The short-run Phillips curve would shift right, and the sacrifice ratio would rise. 
C)  The short-run Phillips curve would shift left, and the sacrifice ratio would fall. 
D)  The short-run Phillips curve would shift left, and the sacrifice ratio would rise.

Question 14

Suppose the minimum wage decreased. At any given rate of inflation, what would happen to output and employment?

Accepted Answer

A)  Both output and employment would be higher. 
B)  Both output and employment would be lower. 
C)  Output would be higher and unemployment would be lower. 
D)  Unemployment would be higher and output would be lower. 
A)  Both output and employment would be higher. 
B)  Both output and employment would be lower. 
C)  Output would be higher and unemployment would be lower. 
D)  Unemployment would be higher and output would be lower.

Question 15

What is one determinant of the natural rate of unemployment?

Accepted Answer

A)  the rate of growth of the money supply 
B)  the generosity of Employment Insurance 
C)  the expected inflation rate 
D)  the exchange rate 
A)  the rate of growth of the money supply 
B)  the generosity of Employment Insurance 
C)  the expected inflation rate 
D)  the exchange rate

Question 16

How will an adverse supply shock shift the short-run Phillips curve, and how does inflation change?

Accepted Answer

A)  It will shift the short-run Phillips curve right, and inflation will rise. 
B)  It will shift the short-run Phillips curve right, and inflation will fall. 
C)  It will shift the short-run Phillips curve left, and inflation will rise. 
D)  It will shift the short-run Phillips curve left, and inflation will fall. 
A)  It will shift the short-run Phillips curve right, and inflation will rise. 
B)  It will shift the short-run Phillips curve right, and inflation will fall. 
C)  It will shift the short-run Phillips curve left, and inflation will rise. 
D)  It will shift the short-run Phillips curve left, and inflation will fall.

Question 17

In the long run, what effect does an increase in the money supply have on prices and unemployment?

Accepted Answer

A)  It leaves prices and unemployment unchanged. 
B)  It lowers prices and unemployment. 
C)  It raises prices and leaves unemployment unchanged. 
D)  It leaves prices unchanged and reduces unemployment. 
A)  It leaves prices and unemployment unchanged. 
B)  It lowers prices and unemployment. 
C)  It raises prices and leaves unemployment unchanged. 
D)  It leaves prices unchanged and reduces unemployment.

Question 18

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

Accepted Answer

A)  the shape of the long-run aggregate-supply curve 
B)  unanticipated inflation, not inflation per se 
C)  rational expectations 
D)  anticipated changes in the price level 
A)  the shape of the long-run aggregate-supply curve 
B)  unanticipated inflation, not inflation per se 
C)  rational expectations 
D)  anticipated changes in the price level

Question 19

What is the effect of an adverse supply shock?

Accepted Answer

A)  The long-run aggregate supply curve shifts to the left. 
B)  The short-run aggregate supply curve shifts to the right. 
C)  The long-run Phillips curve shifts to the left. 
D)  The short-run Phillips curve shifts to the right. 
A)  The long-run aggregate supply curve shifts to the left. 
B)  The short-run aggregate supply curve shifts to the right. 
C)  The long-run Phillips curve shifts to the left. 
D)  The short-run Phillips curve shifts to the right.

Question 20

In the long run, what will shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in the money supply 
C)  a decrease in government spending 
D)  tax cuts 
A)  an increase in the minimum wage 
B)  an increase in the money supply 
C)  a decrease in government spending 
D)  tax cuts

Figure 17-4 -Refer to Figure 17-4. At point m, how do actual and expected inflation rates and unemployment rates compare?

Who is a leading economist in the theory of rational expectations?

In 1980, what was the Canadian inflation rate and unemployment rate?

Suppose the long-run Phillips curve shifts to the right. For any given rate of money growth and inflation, how would unemployment and output change?

Which theory proposes that people optimally use all available information when forecasting the future?

Which of the following data supported A.W. Phillips' findings?

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve (that is, to increase inflation and reduce unemployment)? Were they right or wrong?

Figure 17-2 -Refer to Figure 17-2. Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

In 1980, how did the Canadian misery index compare to the average?

Suppose that the Bank of Canada unexpectedly decreases the money supply. What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Suppose the Bank of Canada decreased the growth rate of the money supply. What would permanently decrease?

If the Bank of Canada announced a policy to reduce inflation and people found it credible, what would happen to the short-run Phillips curve and the sacrifice ratio?

Suppose the minimum wage decreased. At any given rate of inflation, what would happen to output and employment?

What is one determinant of the natural rate of unemployment?

How will an adverse supply shock shift the short-run Phillips curve, and how does inflation change?

In the long run, what effect does an increase in the money supply have on prices and unemployment?

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

What is the effect of an adverse supply shock?

In the long run, what will shift the long-run Phillips curve to the right?

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 17-4 -Refer to Figure 17-4. At point m, how do actual and expected inflation rates and unemployment rates compare?

Who is a leading economist in the theory of rational expectations?

In 1980, what was the Canadian inflation rate and unemployment rate?

Suppose the long-run Phillips curve shifts to the right. For any given rate of money growth and inflation, how would unemployment and output change?

Which theory proposes that people optimally use all available information when forecasting the future?

Which of the following data supported A.W. Phillips' findings?

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve (that is, to increase inflation and reduce unemployment)? Were they right or wrong?

Figure 17-2 -Refer to Figure 17-2. Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

In 1980, how did the Canadian misery index compare to the average?

Suppose that the Bank of Canada unexpectedly decreases the money supply. What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Suppose the Bank of Canada decreased the growth rate of the money supply. What would permanently decrease?

If the Bank of Canada announced a policy to reduce inflation and people found it credible, what would happen to the short-run Phillips curve and the sacrifice ratio?

Suppose the minimum wage decreased. At any given rate of inflation, what would happen to output and employment?

What is one determinant of the natural rate of unemployment?

How will an adverse supply shock shift the short-run Phillips curve, and how does inflation change?

In the long run, what effect does an increase in the money supply have on prices and unemployment?

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

What is the effect of an adverse supply shock?

In the long run, what will shift the long-run Phillips curve to the right?

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