Question 1

In the equation of exchange, if velocity is stable in the long run,

Accepted Answer

A) %∆V = 0. 
B) %∆V = 1. 
C) %∆V is a positive constant value > 0. 
D) %∆V = infinity. 
A) %∆V = 0. 
B) %∆V = 1. 
C) %∆V is a positive constant value > 0. 
D) %∆V = infinity. A

Question 2

In the long run, the major cause of inflation is excessive government spending.

Accepted Answer

A) True 
 B)False  False

Question 3

In general, economists believe that the Phillips curve is

Accepted Answer

A) downward sloping with a steeper slope in the long run than in the short run. 
B) downward sloping with a steeper slope in the short run than in the long run. 
C) downward sloping in the short run but vertical in the long run. 
D) could be horizontal in the short run but always vertical in the long run. 
A) downward sloping with a steeper slope in the long run than in the short run. 
B) downward sloping with a steeper slope in the short run than in the long run. 
C) downward sloping in the short run but vertical in the long run. 
D) could be horizontal in the short run but always vertical in the long run. C

Question 4

Figure 16-2
  
-Refer to Figure 16-2.Consider an economy that experiences a recessionary gap.Which of the points in the diagram is consistent with this situation?

Accepted Answer

A) point X 
B) point Y 
C) either point X or point Y 
D) neither of the two points 
A) point X 
B) point Y 
C) either point X or point Y 
D) neither of the two points

Question 5

In the stagflation phase, a decrease in short-run aggregate supply will generate

Accepted Answer

A) an increase in the inflation rate and in the unemployment rate. 
B) an increase in the inflation rate and a decrease in the unemployment rate. 
C) an increase in the inflation rate with no change in the unemployment rate. 
D) a decrease in the inflation rate and an increase in the unemployment rate. 
A) an increase in the inflation rate and in the unemployment rate. 
B) an increase in the inflation rate and a decrease in the unemployment rate. 
C) an increase in the inflation rate with no change in the unemployment rate. 
D) a decrease in the inflation rate and an increase in the unemployment rate.

Question 6

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap.As suggested by the Phillips curve hypothesis, policy makers instituted a combination of contractionary fiscal and monetary policies to eliminate the output gap.Which of the following occurred as a result?

Accepted Answer

A) The policies moved the economy from the stagflation phase to the Phillips phase. 
B) The policies successfully reduced inflation and increased unemployment. 
C) The outcome suggested by the Phillips curve did not occur, instead unemployment rose with virtually no change in inflation. 
D) The policies moved the economy from a recovery phase to a stagflation phase. 
A) The policies moved the economy from the stagflation phase to the Phillips phase. 
B) The policies successfully reduced inflation and increased unemployment. 
C) The outcome suggested by the Phillips curve did not occur, instead unemployment rose with virtually no change in inflation. 
D) The policies moved the economy from a recovery phase to a stagflation phase.

Question 7

Which of the following statements is true of the U.S.experience with regards to the Phillips curve hypothesis?
I.Values of inflation and unemployment rates during the 1960s are atypical in that they generally conformed to the tradeoff implied by the Phillips curve.
II.Annual observations of inflation and unemployment from 1961 to 2008 do not
Seem consistent with a Phillips curve.
III.Annual observations of inflation and unemployment from 1961 to 2008 seem consistent
With a Phillips curve.

Accepted Answer

A) I only 
B) II only 
C) I and II only 
D) III only 
A) I only 
B) II only 
C) I and II only 
D) III only

Question 8

The Phillips curve implies a positive relationship between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-6
  
-Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.When workers and firms adjust their expectations in a higher price level and act on these expectations, the economy moves from the

Accepted Answer

A) expansionary phase to the recovery phase of the inflation-unemployment cycle. 
B) Phillips phase to the stagflation phase of the inflation-unemployment cycle. 
C) Phillips phase to the recovery phase of the inflation-unemployment cycle. 
D) stagflation phase to the recovery phase of the inflation-unemployment cycle. 
A) expansionary phase to the recovery phase of the inflation-unemployment cycle. 
B) Phillips phase to the stagflation phase of the inflation-unemployment cycle. 
C) Phillips phase to the recovery phase of the inflation-unemployment cycle. 
D) stagflation phase to the recovery phase of the inflation-unemployment cycle.

Question 10

What are the three phases of the inflation-unemployment cycle?

Accepted Answer

A) the expansionary phase, the full-employment phase, and the contractionary phase 
B) the Phillips phase, the stagflation phase, and the growth phase 
C) the Phillips phase, the stagflation phase, and the recovery phase 
D) the expansionary phase, the stagflation phase, and the recovery phase 
A) the expansionary phase, the full-employment phase, and the contractionary phase 
B) the Phillips phase, the stagflation phase, and the growth phase 
C) the Phillips phase, the stagflation phase, and the recovery phase 
D) the expansionary phase, the stagflation phase, and the recovery phase

Question 11

The Phillips phase of the inflation-unemployment cycle emerges because

Accepted Answer

A) prices and wages are sticky. 
B) nominal wages and prices fall. 
C) the economy is stuck in an equilibrium below full employment. 
D) people fully expect the price increases produced by increases in aggregate demand. 
A) prices and wages are sticky. 
B) nominal wages and prices fall. 
C) the economy is stuck in an equilibrium below full employment. 
D) people fully expect the price increases produced by increases in aggregate demand.

Question 12

In the long run, unemployment
I.will be at the natural rate of unemployment.
II.is made up of structural and frictional unemployment.
III.could be made up of structural, frictional, and cyclical unemployment.

Accepted Answer

A) I, II, and III 
B) I and III only 
C) I and II only 
D) I only 
A) I, II, and III 
B) I and III only 
C) I and II only 
D) I only

Question 13

The vertical Phillips curve occurs in the long run because

Accepted Answer

A) the aggregate supply curve is vertical which means that changes in aggregate demand will not change unemployment. 
B) wage and price rigidities prevent changes in aggregate demand to change unemployment. 
C) economic agents are quick to respond to changes in the price level. 
D) of lags in monetary and fiscal policies. 
A) the aggregate supply curve is vertical which means that changes in aggregate demand will not change unemployment. 
B) wage and price rigidities prevent changes in aggregate demand to change unemployment. 
C) economic agents are quick to respond to changes in the price level. 
D) of lags in monetary and fiscal policies.

Question 14

Figure 16-7
  
-Refer to Figure 16-7.The movement from _____ is representative of the _____ phase of the Inflation-unemployment cycle.

Accepted Answer

A) point 1 to point 2; recovery 
B) point 3 to point 4; stagflation 
C) point 3 to point 2; Phillips 
D) point 4 to point 3; Phillips 
A) point 1 to point 2; recovery 
B) point 3 to point 4; stagflation 
C) point 3 to point 2; Phillips 
D) point 4 to point 3; Phillips

Question 15

In the three phases of the inflation-unemployment cycle, a period characterized by declining Inflation and unemployment is called the

Accepted Answer

A) economic growth phase. 
B) stagflation phase. 
C) recovery phase. 
D) Phillips phase. 
A) economic growth phase. 
B) stagflation phase. 
C) recovery phase. 
D) Phillips phase.

Question 16

In the late 1970s, the U.S.economy entered a stagflation phase characterized by

Accepted Answer

A) unemployment below its natural rate and rising inflation 
B) unemployment above its natural rate and rising inflation. 
C) unemployment at its natural rate and rising inflation. 
D) unemployment above its natural rate and constant inflation. 
A) unemployment below its natural rate and rising inflation 
B) unemployment above its natural rate and rising inflation. 
C) unemployment at its natural rate and rising inflation. 
D) unemployment above its natural rate and constant inflation.

Question 17

Figure 16-7
  
-Refer to Figure 16-7.If the economy is at point 4, boosting aggregate demand through Expansionary policies will most likely lead to

Accepted Answer

A) the stagflation phase. 
B) the recovery phase. 
C) the Phillips phase. 
D) the contraction phase. 
A) the stagflation phase. 
B) the recovery phase. 
C) the Phillips phase. 
D) the contraction phase.

Question 18

Figure 16-3
  
-Refer to Figure 16-3.The figure shows the three phases of the inflation-unemployment Cycle.What are these three phases, moving clockwise from point A?

Accepted Answer

A) Phillips phase, recovery phase, stagflation phase 
B) recovery phase, stagflation phase, Phillips phase 
C) Phillips phase, stagflation phase, recovery phase 
D) stagflation phase, recovery phase, Phillips phase 
A) Phillips phase, recovery phase, stagflation phase 
B) recovery phase, stagflation phase, Phillips phase 
C) Phillips phase, stagflation phase, recovery phase 
D) stagflation phase, recovery phase, Phillips phase

Question 19

Figure 16-2
  
-Refer to Figure 16-2.Consider an economy that experiences an inflationary gap.Which of the points in the diagram is consistent with this situation?

Accepted Answer

A) point X 
B) point Y 
C) either point X or point Y 
D) neither of the two points 
A) point X 
B) point Y 
C) either point X or point Y 
D) neither of the two points

Question 20

The inflation rate can be measured as

Accepted Answer

A) the change in the average price level from one year to the next. 
B) the change in the implicit price deflator from one year to the next. 
C) the annual percentage change in the implicit price deflator from one year to the next. 
D) the change in the consumer price index from one year to the next. 
A) the change in the average price level from one year to the next. 
B) the change in the implicit price deflator from one year to the next. 
C) the annual percentage change in the implicit price deflator from one year to the next. 
D) the change in the consumer price index from one year to the next.

Exam 31: Macro Inflation and Unemployment

In the equation of exchange, if velocity is stable in the long run,

In the long run, the major cause of inflation is excessive government spending.

In general, economists believe that the Phillips curve is

Figure 16-2 -Refer to Figure 16-2.Consider an economy that experiences a recessionary gap.Which of the points in the diagram is consistent with this situation?

In the stagflation phase, a decrease in short-run aggregate supply will generate

The Phillips curve implies a positive relationship between inflation and unemployment.

What are the three phases of the inflation-unemployment cycle?

The Phillips phase of the inflation-unemployment cycle emerges because

In the long run, unemployment I.will be at the natural rate of unemployment. II.is made up of structural and frictional unemployment. III.could be made up of structural, frictional, and cyclical unemployment.

The vertical Phillips curve occurs in the long run because

Figure 16-7 -Refer to Figure 16-7.The movement from _____ is representative of the _____ phase of the Inflation-unemployment cycle.

In the three phases of the inflation-unemployment cycle, a period characterized by declining Inflation and unemployment is called the

In the late 1970s, the U.S.economy entered a stagflation phase characterized by

Figure 16-7 -Refer to Figure 16-7.If the economy is at point 4, boosting aggregate demand through Expansionary policies will most likely lead to

Figure 16-3 -Refer to Figure 16-3.The figure shows the three phases of the inflation-unemployment Cycle.What are these three phases, moving clockwise from point A?

Figure 16-2 -Refer to Figure 16-2.Consider an economy that experiences an inflationary gap.Which of the points in the diagram is consistent with this situation?

The inflation rate can be measured as

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

Filters

Figure 16-7 -Refer to Figure 16-7.The movement from _ is representative of the _ phase of the Inflation-unemployment cycle.