Question 1

Monetized debt:

Accepted Answer

A)  is paid for by a decrease in the money supply. 
B)  results in appreciation of the dollar. 
C)  will result in a weaker dollar if foreigners hold fewer dollars. 
D)  increases the burden of existing debt. 
A)  is paid for by a decrease in the money supply. 
B)  results in appreciation of the dollar. 
C)  will result in a weaker dollar if foreigners hold fewer dollars. 
D)  increases the burden of existing debt. C

Question 2

Subprime mortgages were loans made to borrowers with _____ credit and who, as a result, were charged _____ interest rates.

Accepted Answer

A)  excellent; low 
B)  excellent; high 
C)  poor; low 
D)  poor; high 
A)  excellent; low 
B)  excellent; high 
C)  poor; low 
D)  poor; high D

Question 3

According to the equation for the Phillips curve, if wages rise by 2%, inflation:

Accepted Answer

A)  must also rise by 2%. 
B)  will be zero if productivity increases by 2%. 
C)  will be zero if productivity increases by more than 2%. 
D)  will be zero if productivity falls by 2%. 
A)  must also rise by 2%. 
B)  will be zero if productivity increases by 2%. 
C)  will be zero if productivity increases by more than 2%. 
D)  will be zero if productivity falls by 2%. B

Question 4

The adjustable-rate mortgage was the standard type before the early 2000s.

Accepted Answer

A) True 
 B)False

Question 5

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be:

Accepted Answer

A)  an increase in aggregate supply. 
B)  a stable Phillips curve. 
C)  increasing structural unemployment. 
D)  accelerating inflation. 
A)  an increase in aggregate supply. 
B)  a stable Phillips curve. 
C)  increasing structural unemployment. 
D)  accelerating inflation.

Question 6

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC1 to Phillips curve PC0?

Accepted Answer

A)  a decrease in the expected inflation rate 
B)  an increase in the expected inflation rate 
C)  a decrease in the natural rate of unemployment 
D)  an increase in the natural rate of unemployment 
A)  a decrease in the expected inflation rate 
B)  an increase in the expected inflation rate 
C)  a decrease in the natural rate of unemployment 
D)  an increase in the natural rate of unemployment

Question 7

Which of these helps explain jobless recoveries?

Accepted Answer

A)  U.S. productivity has been decreasing. 
B)  Firms have been unwilling to hire temporary workers until they know the demand for their product has reached prerecession levels. 
C)  Firms are not willing to pay for overtime until the demand for their product recovers. 
D)  Increased technology has enabled companies to use fewer workers. 
A)  U.S. productivity has been decreasing. 
B)  Firms have been unwilling to hire temporary workers until they know the demand for their product has reached prerecession levels. 
C)  Firms are not willing to pay for overtime until the demand for their product recovers. 
D)  Increased technology has enabled companies to use fewer workers.

Question 8

One of the primary assumptions of the rational expectations model is that:

Accepted Answer

A)  labor and product markets are highly competitive. 
B)  people expect others to behave irrationally. 
C)  labor markets exhibit short-term stickiness. 
D)  prices do not adjust quickly to expansionary policies. 
A)  labor and product markets are highly competitive. 
B)  people expect others to behave irrationally. 
C)  labor markets exhibit short-term stickiness. 
D)  prices do not adjust quickly to expansionary policies.

Question 9

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

Accepted Answer

A) True 
 B)False

Question 10

If inflationary expectations fall:

Accepted Answer

A)  there is a movement down along the Phillips curve. 
B)  the Phillips curve shifts outward. 
C)  the Phillips curve shifts inward. 
D)  there is a movement up along the Phillips curve. 
A)  there is a movement down along the Phillips curve. 
B)  the Phillips curve shifts outward. 
C)  the Phillips curve shifts inward. 
D)  there is a movement up along the Phillips curve.

Question 11

If policymakers want to keep unemployment below the natural rate, they must continually increase aggregate demand so that inflation is always greater than anticipated, thereby setting up an inflationary spiral.

Accepted Answer

A) True 
 B)False

Question 12

By paying an efficiency wage, employers give employees an incentive to shirk their duties.

Accepted Answer

A) True 
 B)False

Question 13

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports.

Accepted Answer

A) True 
 B)False

Question 14

(Figure: Aggregate Supply and Demand Shifts) The economy is originally at its long-run equilibrium, SRAS0 and AD0. Government policymakers signal that they intend to reduce aggregate demand from AD0 to AD1. If we assume that individuals have rational expectations, then the speed of the shift from SRAS0 to SRAS1 will happen:

Accepted Answer

A)  almost immediately. 
B)  after a long lag. 
C)  only after the government finishes fully implementing its policy. 
D)  too slowly to affect the price level. 
A)  almost immediately. 
B)  after a long lag. 
C)  only after the government finishes fully implementing its policy. 
D)  too slowly to affect the price level.

Question 15

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Accepted Answer

A)  2% 
B)  5% 
C)  8% 
D)  15% 
A)  2% 
B)  5% 
C)  8% 
D)  15%

Question 16

Adaptive expectations theory describes the use of _____ to form expectations of inflation.

Accepted Answer

A)  all publicly available information 
B)  expected future policies 
C)  present data 
D)  past rates of inflation only 
A)  all publicly available information 
B)  expected future policies 
C)  present data 
D)  past rates of inflation only

Question 17

Which of these is NOT a way that hiring practices have changed over the past few decades?

Accepted Answer

A)  Firms use more temporary workers. 
B)  Firms are more likely to add overtime shifts for permanent employees. 
C)  Firms are more likely to use just-in-time hiring practices. 
D)  Firms are more likely to hire permanent employees. 
A)  Firms use more temporary workers. 
B)  Firms are more likely to add overtime shifts for permanent employees. 
C)  Firms are more likely to use just-in-time hiring practices. 
D)  Firms are more likely to hire permanent employees.

Question 18

If wages rise by 3% and productivity rises by 2%, then prices can be expected to rise by 5%.

Accepted Answer

A) True 
 B)False

Question 19

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCb?

Accepted Answer

A)  zero 
B)  3% 
C)  4% 
D)  5% 
A)  zero 
B)  3% 
C)  4% 
D)  5%

Question 20

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to:

Accepted Answer

A)  increase unemployment. 
B)  shift the Phillips curve to the right. 
C)  reduce tax revenues. 
D)  shift the Phillips curve to the left. 
A)  increase unemployment. 
B)  shift the Phillips curve to the right. 
C)  reduce tax revenues. 
D)  shift the Phillips curve to the left.

Monetized debt:

Subprime mortgages were loans made to borrowers with _ credit and who, as a result, were charged _ interest rates.

According to the equation for the Phillips curve, if wages rise by 2%, inflation:

The adjustable-rate mortgage was the standard type before the early 2000s.

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be:

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC₁ to Phillips curve PC₀?

Which of these helps explain jobless recoveries?

One of the primary assumptions of the rational expectations model is that:

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

If inflationary expectations fall:

If policymakers want to keep unemployment below the natural rate, they must continually increase aggregate demand so that inflation is always greater than anticipated, thereby setting up an inflationary spiral.

By paying an efficiency wage, employers give employees an incentive to shirk their duties.

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports.

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Adaptive expectations theory describes the use of _____ to form expectations of inflation.

Which of these is NOT a way that hiring practices have changed over the past few decades?

If wages rise by 3% and productivity rises by 2%, then prices can be expected to rise by 5%.

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_b?

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to:

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

International Trade

Open Economy Macroeconomics

Filters

Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Monetized debt:

Subprime mortgages were loans made to borrowers with _____ credit and who, as a result, were charged _____ interest rates.

According to the equation for the Phillips curve, if wages rise by 2%, inflation:

The adjustable-rate mortgage was the standard type before the early 2000s.

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be:

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC1 to Phillips curve PC0?

Which of these helps explain jobless recoveries?

One of the primary assumptions of the rational expectations model is that:

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

If inflationary expectations fall:

If policymakers want to keep unemployment below the natural rate, they must continually increase aggregate demand so that inflation is always greater than anticipated, thereby setting up an inflationary spiral.

By paying an efficiency wage, employers give employees an incentive to shirk their duties.

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports.

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Adaptive expectations theory describes the use of _____ to form expectations of inflation.

Which of these is NOT a way that hiring practices have changed over the past few decades?

If wages rise by 3% and productivity rises by 2%, then prices can be expected to rise by 5%.

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCb?

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to:

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

International Trade

Open Economy Macroeconomics

Filters

Subprime mortgages were loans made to borrowers with _ credit and who, as a result, were charged _ interest rates.

(Figure: Understanding Phillips Curves Shifts 2) What would cause an outward shift from Phillips curve PC₁ to Phillips curve PC₀?

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_b?