Question 1

If the self-correcting mechanism operates quickly,

Accepted Answer

A)  direct intervention is less necessary to close a recessionary gap. 
B)  fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. 
C)  monetary policy is far more useful in closing a recessionary gap than fiscal policy. 
D)  fiscal stimulus is ineffective and inflation will occur. 
A)  direct intervention is less necessary to close a recessionary gap. 
B)  fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. 
C)  monetary policy is far more useful in closing a recessionary gap than fiscal policy. 
D)  fiscal stimulus is ineffective and inflation will occur. A

Question 2

If you believe that expectations react quickly,you are likely:

Accepted Answer

A)  ​a believer in rational expectations 
B)  ​a Keynesian 
C)  ​a theoretical economist 
D)  ​None of these. 
A)  ​a believer in rational expectations 
B)  ​a Keynesian 
C)  ​a theoretical economist 
D)  ​None of these. A

Question 3

Figure 17-4  
-Which of the factors below contributed to the collapse of the Phillips curve in the 1970s?

Accepted Answer

A)  Economic research proved there was no relationship between inflation and unemployment rates. 
B)  The U.S.government was running triple-digit deficits in the 1970s,compounding the normal shifts in aggregate demand. 
C)  The 1970s were full of adverse supply shocks such as the oil price increases of 1973-1974. 
D)  The aggregate demand curve shifted to the left at the end of the Vietnam War. 
A)  Economic research proved there was no relationship between inflation and unemployment rates. 
B)  The U.S.government was running triple-digit deficits in the 1970s,compounding the normal shifts in aggregate demand. 
C)  The 1970s were full of adverse supply shocks such as the oil price increases of 1973-1974. 
D)  The aggregate demand curve shifted to the left at the end of the Vietnam War. C

Question 4

The rational expectations hypothesis is impeccably logical,but inconsistent with the facts.

Accepted Answer

A) True 
 B)False

Question 5

Many economists think that,in the long run,the Phillips curve is

Accepted Answer

A)  a horizontal line. 
B)  a vertical line. 
C)  the same as the short-run curve. 
D)  a 45-degree line from the origin. 
A)  a horizontal line. 
B)  a vertical line. 
C)  the same as the short-run curve. 
D)  a 45-degree line from the origin.

Question 6

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases,then data would show the most rapid inflation occurs when

Accepted Answer

A)  unemployment is the highest,and the lowest inflation occurs when unemployment is the lowest. 
B)  AS grows most rapidly,and the lowest inflation occurs when AS grows most slowly. 
C)  AD rises most slowly,and the lowest inflation occurs when AD rises most rapidly. 
D)  output grows most rapidly and the lowest inflation when output grows most slowly. 
A)  unemployment is the highest,and the lowest inflation occurs when unemployment is the lowest. 
B)  AS grows most rapidly,and the lowest inflation occurs when AS grows most slowly. 
C)  AD rises most slowly,and the lowest inflation occurs when AD rises most rapidly. 
D)  output grows most rapidly and the lowest inflation when output grows most slowly.

Question 7

If workers always see inflation coming,and if they demand wage increases in advance so that inflation does not erode real wages,then the economy's aggregate supply curve on the AD-AS diagram will

Accepted Answer

A)  be a vertical line corresponding to potential GDP. 
B)  be a horizontal line corresponding to potential GDP. 
C)  slope downward. 
D)  slope upward. 
A)  be a vertical line corresponding to potential GDP. 
B)  be a horizontal line corresponding to potential GDP. 
C)  slope downward. 
D)  slope upward.

Question 8

The Keynesian view of the world is that the

Accepted Answer

A)  self-correcting mechanism is unreliable. 
B)  benefits of fighting unemployment are high and the costs are low. 
C)  short-run Phillips curve is relatively flat. 
D)  All of the above are correct. 
A)  self-correcting mechanism is unreliable. 
B)  benefits of fighting unemployment are high and the costs are low. 
C)  short-run Phillips curve is relatively flat. 
D)  All of the above are correct.

Question 9

If strong monetary policy stimulus is used to combat a recessionary gap,what will happen?

Accepted Answer

A)  a rapid movement toward lower unemployment and higher inflation 
B)  a rapid movement toward lower unemployment and lower inflation 
C)  a slow movement toward lower unemployment and higher inflation 
D)  a slow movement toward lower unemployment and lower inflation 
A)  a rapid movement toward lower unemployment and higher inflation 
B)  a rapid movement toward lower unemployment and lower inflation 
C)  a slow movement toward lower unemployment and higher inflation 
D)  a slow movement toward lower unemployment and lower inflation

Question 10

Figure 17-4  
-Figure 17-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 11

Fiscal and monetary policy can reduce unemployment with no negative side effects.

Accepted Answer

A) True 
 B)False

Question 12

The natural rate of unemployment corresponds to what is sometimes called the full employment unemployment rate.

Accepted Answer

A) True 
 B)False

Question 13

One way in which the Phillips curve is misinterpreted is to think of it as

Accepted Answer

A)  a model of economic activity that explains changes in unemployment and inflation by changes in aggregate demand. 
B)  a statistical relationship between inflation and unemployment. 
C)  depicting a number of alternative equilibrium points the economy could achieve. 
D)  All of the above. 
A)  a model of economic activity that explains changes in unemployment and inflation by changes in aggregate demand. 
B)  a statistical relationship between inflation and unemployment. 
C)  depicting a number of alternative equilibrium points the economy could achieve. 
D)  All of the above.

Question 14

Figure 17-2  
-Given the situation in graph (1)in Figure 17-2,what action could be expected from the economy's self-correcting mechanism?

Accepted Answer

A)  an increase in aggregate demand 
B)  a decrease in aggregate demand 
C)  an increase in aggregate supply 
D)  a decrease in aggregate supply 
A)  an increase in aggregate demand 
B)  a decrease in aggregate demand 
C)  an increase in aggregate supply 
D)  a decrease in aggregate supply

Question 15

Most economists today believe that the Phillips curve is

Accepted Answer

A)  vertical in the short run but downward sloping in the long run. 
B)  upward sloping in the short run but vertical in the long run. 
C)  downward sloping in the short run but vertical in the long run. 
D)  vertical in the short run but upward sloping in the long run. 
A)  vertical in the short run but downward sloping in the long run. 
B)  upward sloping in the short run but vertical in the long run. 
C)  downward sloping in the short run but vertical in the long run. 
D)  vertical in the short run but upward sloping in the long run.

Question 16

Figure 17-1  
-Which of the following is true about the economy depicted in Figure 17-1?

Accepted Answer

A)  It is experiencing supply-side inflation. 
B)  Policy makers have chosen to fight inflation rather than unemployment. 
C)  The increase in aggregate demand has increased prices but not real GDP. 
D)  The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation. 
A)  It is experiencing supply-side inflation. 
B)  Policy makers have chosen to fight inflation rather than unemployment. 
C)  The increase in aggregate demand has increased prices but not real GDP. 
D)  The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.

Question 17

Most economists agree that the self-correcting mechanism works

Accepted Answer

A)  very slowly. 
B)  very rapidly. 
C)  rapidly in the short run and slowly in the long run. 
D)  slowly in the short run and rapidly in the long run. 
A)  very slowly. 
B)  very rapidly. 
C)  rapidly in the short run and slowly in the long run. 
D)  slowly in the short run and rapidly in the long run.

Question 18

Politicians and economists who are generally conservative tend to believe that

Accepted Answer

A)  the self-correcting mechanism is slow and unpredictable. 
B)  the short-run Phillips curve is relatively steep. 
C)  the costs of unemployment are high. 
D)  expectations in reaction to policy measures are very slow to change. 
A)  the self-correcting mechanism is slow and unpredictable. 
B)  the short-run Phillips curve is relatively steep. 
C)  the costs of unemployment are high. 
D)  expectations in reaction to policy measures are very slow to change.

Question 19

One reason why the Phillips curve "broke down" is

Accepted Answer

A)  most of the inflation of the 1970s was from the demand side. 
B)  most of the inflation of the 1970s was from the supply side. 
C)  the inflation of the 1970s was foreseen,unlike the inflation of the 1980s. 
D)  the inflation of the 1970s was purely random and could not be explained with economic theory. 
A)  most of the inflation of the 1970s was from the demand side. 
B)  most of the inflation of the 1970s was from the supply side. 
C)  the inflation of the 1970s was foreseen,unlike the inflation of the 1980s. 
D)  the inflation of the 1970s was purely random and could not be explained with economic theory.

Question 20

To make rational forecasts,your predictions do not have to be correct all of the time.

Accepted Answer

A) True 
 B)False

If the self-correcting mechanism operates quickly,

If you believe that expectations react quickly,you are likely:

Figure 17-4 -Which of the factors below contributed to the collapse of the Phillips curve in the 1970s?

The rational expectations hypothesis is impeccably logical,but inconsistent with the facts.

Many economists think that,in the long run,the Phillips curve is

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases,then data would show the most rapid inflation occurs when

If workers always see inflation coming,and if they demand wage increases in advance so that inflation does not erode real wages,then the economy's aggregate supply curve on the AD-AS diagram will

The Keynesian view of the world is that the

If strong monetary policy stimulus is used to combat a recessionary gap,what will happen?

Figure 17-4 -Figure 17-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Fiscal and monetary policy can reduce unemployment with no negative side effects.

The natural rate of unemployment corresponds to what is sometimes called the full employment unemployment rate.

One way in which the Phillips curve is misinterpreted is to think of it as

Figure 17-2 -Given the situation in graph (1)in Figure 17-2,what action could be expected from the economy's self-correcting mechanism?

Most economists today believe that the Phillips curve is

Figure 17-1 -Which of the following is true about the economy depicted in Figure 17-1?

Most economists agree that the self-correcting mechanism works

Politicians and economists who are generally conservative tend to believe that

One reason why the Phillips curve "broke down" is

To make rational forecasts,your predictions do not have to be correct all of the time.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 17: The Trade Off Between Inflation and Unemployment

If the self-correcting mechanism operates quickly,

If you believe that expectations react quickly,you are likely:

Figure 17-4 -Which of the factors below contributed to the collapse of the Phillips curve in the 1970s?

The rational expectations hypothesis is impeccably logical,but inconsistent with the facts.

Many economists think that,in the long run,the Phillips curve is

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases,then data would show the most rapid inflation occurs when

If workers always see inflation coming,and if they demand wage increases in advance so that inflation does not erode real wages,then the economy's aggregate supply curve on the AD-AS diagram will

The Keynesian view of the world is that the

If strong monetary policy stimulus is used to combat a recessionary gap,what will happen?

Figure 17-4 -Figure 17-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Fiscal and monetary policy can reduce unemployment with no negative side effects.

The natural rate of unemployment corresponds to what is sometimes called the full employment unemployment rate.

One way in which the Phillips curve is misinterpreted is to think of it as

Figure 17-2 -Given the situation in graph (1)in Figure 17-2,what action could be expected from the economy's self-correcting mechanism?

Most economists today believe that the Phillips curve is

Figure 17-1 -Which of the following is true about the economy depicted in Figure 17-1?

Most economists agree that the self-correcting mechanism works

Politicians and economists who are generally conservative tend to believe that

One reason why the Phillips curve "broke down" is

To make rational forecasts,your predictions do not have to be correct all of the time.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters