Question 1

According to the text, if individuals base their expectations on the past, we could say that their expectations are:

Accepted Answer

A) rational. 
B) historical. 
C) adaptive. 
D) regressive. 
A) rational. 
B) historical. 
C) adaptive. 
D) regressive.

Question 2

Economists who believe in the quantity theory favor monetary policy set by rules.Why?

Accepted Answer

These economists argue that th

Question 3

The short-run Phillips curve differs from the long-run Phillips curve with regard to the way:

Accepted Answer

A) expected inflation is treated. 
B) wages are treated. 
C) prices are treated. 
D) unemployment is treated. 
A) expected inflation is treated. 
B) wages are treated. 
C) prices are treated. 
D) unemployment is treated.

Question 4

Assume the money supply is $1000,the velocity of money is 12,and the price level is $4.Using the quantity theory of money:
(a)Determine the level of real output.
(b)Determine the level of nominal output.
(c)Assuming velocity remains constant,what will happen if the money supply rises by 10%?

Accepted Answer

(a)Use the equation of exchange to deter

Question 5

Use a Phillips curve diagram to explain the difference between the macroeconomic policy positions of the quantity theorists and the institutionalists.

Accepted Answer

The institutionalists favored expansiona

Question 6

Refer to the graph shown. The relationship represented in the figure is called a:

Accepted Answer

A) labor supply curve. 
B) labor demand curve. 
C) short-run Phillips curve. 
D) long-run Phillips curve. 
A) labor supply curve. 
B) labor demand curve. 
C) short-run Phillips curve. 
D) long-run Phillips curve.

Question 7

Velocity can be calculated as the ratio of:

Accepted Answer

A) nominal GDP to real GNP. 
B) nominal GDP to the money supply. 
C) real GDP to the price level. 
D) the money supply to the price level. 
A) nominal GDP to real GNP. 
B) nominal GDP to the money supply. 
C) real GDP to the price level. 
D) the money supply to the price level.

Question 8

How would institutionally focused economist's explanation of the inflation process likely differ from a quantity theorist's explanation?

Accepted Answer

An institutionally focused economist wou

Question 9

According to the quantity theory:

Accepted Answer

A) unemployment is everywhere and always a monetary phenomenon. 
B) inflation is everywhere and always a monetary phenomenon. 
C) the equation of exchange does not hold true. 
D) real output is everywhere and always a monetary phenomenon. 
A) unemployment is everywhere and always a monetary phenomenon. 
B) inflation is everywhere and always a monetary phenomenon. 
C) the equation of exchange does not hold true. 
D) real output is everywhere and always a monetary phenomenon.

Question 10

When inflation is unexpected, it tends to hurt:

Accepted Answer

A) people who save money in financial institutions. 
B) people who borrow money from financial institutions. 
C) businesses who borrow money from financial institutions. 
D) people with flexible income. 
A) people who save money in financial institutions. 
B) people who borrow money from financial institutions. 
C) businesses who borrow money from financial institutions. 
D) people with flexible income.

Question 11

According to the quantity theory of money, if the monetary authorities allow the money supply to grow at a rate of 6 percent in an economy that is growing by 2 percent in real terms, then inflation will be:

Accepted Answer

A) 2 percent. 
B) 4 percent. 
C) 6 percent. 
D) 8 percent. 
A) 2 percent. 
B) 4 percent. 
C) 6 percent. 
D) 8 percent.

Question 12

The long-run Phillips curve shifts to the left or the right as expectations of inflation change.

Accepted Answer

A) True 
 B)False

Question 13

According to institutionally-focused economists:

Accepted Answer

A) the direction of causation goes from MV to PQ. 
B) the direction of causation goes from PQ to MV. 
C) there is no relationship between PQ and MV because V is constant. 
D) there is no relationship between PQ and MV because Q isn't constant. 
A) the direction of causation goes from MV to PQ. 
B) the direction of causation goes from PQ to MV. 
C) there is no relationship between PQ and MV because V is constant. 
D) there is no relationship between PQ and MV because Q isn't constant.

Question 14

Refer to the graph shown. The shift in the short-run Phillips curve shown is most likely to be caused by:

Accepted Answer

A) a decrease in expected inflation. 
B) an increase in expected inflation. 
C) a decrease in labor productivity. 
D) an increase in labor productivity. 
A) a decrease in expected inflation. 
B) an increase in expected inflation. 
C) a decrease in labor productivity. 
D) an increase in labor productivity.

Question 15

If global prices are lower than domestic prices, the short-run Phillips curve is likely to be horizontal.

Accepted Answer

A) True 
 B)False

Question 16

It's difficult to measure asset inflation because asset prices can increase when assets become more productive.

Accepted Answer

A) True 
 B)False

Question 17

The quantity theory of money concludes that if real output is constant:

Accepted Answer

A) changes in the price level are caused by changes in the money supply. 
B) real GDP and the money supply are related in the long run. 
C) changes in velocity are proportional to changes in nominal income. 
D) changes in velocity are proportional to changes in the money supply. 
A) changes in the price level are caused by changes in the money supply. 
B) real GDP and the money supply are related in the long run. 
C) changes in velocity are proportional to changes in nominal income. 
D) changes in velocity are proportional to changes in the money supply.

Question 18

Draw a short run and long-run Phillips curve.Why is the shape of the short-run Phillips curve different from the shape of the long-run Phillips curve?

Accepted Answer

The short-run Phillips curve shows the t

Question 19

Inflation is undesirable because it:

Accepted Answer

A) always makes the nation poorer. 
B) redistributes income from those who can raise prices to those who cannot. 
C) distorts the information value of prices. 
D) makes everyone worse off. 
A) always makes the nation poorer. 
B) redistributes income from those who can raise prices to those who cannot. 
C) distorts the information value of prices. 
D) makes everyone worse off.

Question 20

The short-run Phillips curve tells us, in theory, what combinations of:

Accepted Answer

A) inflation and output are feasible. 
B) the price level and output are feasible. 
C) inflation and unemployment are possible when expectations of inflation are constant. 
D) the price level and unemployment are possible when expectations of inflation are constant. 
A) inflation and output are feasible. 
B) the price level and output are feasible. 
C) inflation and unemployment are possible when expectations of inflation are constant. 
D) the price level and unemployment are possible when expectations of inflation are constant.

Exam 34: Inflation, Deflation, and Macro Policy

According to the text, if individuals base their expectations on the past, we could say that their expectations are:

Economists who believe in the quantity theory favor monetary policy set by rules.Why?

The short-run Phillips curve differs from the long-run Phillips curve with regard to the way:

Assume the money supply is $1000,the velocity of money is 12,and the price level is $4.Using the quantity theory of money: (a)Determine the level of real output. (b)Determine the level of nominal output. (c)Assuming velocity remains constant,what will happen if the money supply rises by 10%?

Use a Phillips curve diagram to explain the difference between the macroeconomic policy positions of the quantity theorists and the institutionalists.

Refer to the graph shown. The relationship represented in the figure is called a:

Velocity can be calculated as the ratio of:

How would institutionally focused economist's explanation of the inflation process likely differ from a quantity theorist's explanation?

According to the quantity theory:

When inflation is unexpected, it tends to hurt:

According to the quantity theory of money, if the monetary authorities allow the money supply to grow at a rate of 6 percent in an economy that is growing by 2 percent in real terms, then inflation will be:

The long-run Phillips curve shifts to the left or the right as expectations of inflation change.

According to institutionally-focused economists:

Refer to the graph shown. The shift in the short-run Phillips curve shown is most likely to be caused by:

If global prices are lower than domestic prices, the short-run Phillips curve is likely to be horizontal.

It's difficult to measure asset inflation because asset prices can increase when assets become more productive.

The quantity theory of money concludes that if real output is constant:

Draw a short run and long-run Phillips curve.Why is the shape of the short-run Phillips curve different from the shape of the long-run Phillips curve?

Inflation is undesirable because it:

The short-run Phillips curve tells us, in theory, what combinations of:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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