Question 1

In the long run, unemployment will be at the natural rate.This implies that

Accepted Answer

A) there is a one-to-one relationship between unemployment and inflation and consequently, the Phillips curve is vertical. 
B) there is no relationship between unemployment and inflation and consequently, the Phillips curve is vertical. 
C) there is a positive relationship between unemployment and inflation and consequently, the Phillips curve is upward-sloping. 
D) there is a negative relationship between unemployment and inflation and consequently, the Phillips curve is downward-sloping. 
A) there is a one-to-one relationship between unemployment and inflation and consequently, the Phillips curve is vertical. 
B) there is no relationship between unemployment and inflation and consequently, the Phillips curve is vertical. 
C) there is a positive relationship between unemployment and inflation and consequently, the Phillips curve is upward-sloping. 
D) there is a negative relationship between unemployment and inflation and consequently, the Phillips curve is downward-sloping.

Question 2

If the efficiency wage theory holds,

Accepted Answer

A) wage rigidity that perpetuates a recessionary gap is transformed from a temporary phenomenon to a permanent feature. 
B) self-correction will automatically eliminate a recessionary gap. 
C) increases in real wages will be required to eliminate a recessionary gap. 
D) increases in nominal wages will be required to close a recessionary gap. 
A) wage rigidity that perpetuates a recessionary gap is transformed from a temporary phenomenon to a permanent feature. 
B) self-correction will automatically eliminate a recessionary gap. 
C) increases in real wages will be required to eliminate a recessionary gap. 
D) increases in nominal wages will be required to close a recessionary gap.

Question 3

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.What happens when workers and firms adjust their expectations in a higher price level and act on these expectations?

Accepted Answer

A) The aggregate demand curve shifts to the left until it intersects the long-run aggregate supply (LRAS)curve. 
B) The short-run aggregate supply (SRAS)curve shifts to the right. 
C) The SRAS curve shifts to the left. 
D) Both the LRAS and the SRAS curves shift to the right. 
A) The aggregate demand curve shifts to the left until it intersects the long-run aggregate supply (LRAS)curve. 
B) The short-run aggregate supply (SRAS)curve shifts to the right. 
C) The SRAS curve shifts to the left. 
D) Both the LRAS and the SRAS curves shift to the right.

Question 4

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP)in the long run?

Accepted Answer

A) If the growth rate in YP exceeds the money growth rate, there will be inflation. 
B) If the money growth rate exceeds the growth rate in YP, there will be deflation. 
C) If the money supply grows at the same rate as growth in YP, the price level will grow at a constant rate. 
D) If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP. 
A) If the growth rate in YP exceeds the money growth rate, there will be inflation. 
B) If the money growth rate exceeds the growth rate in YP, there will be deflation. 
C) If the money supply grows at the same rate as growth in YP, the price level will grow at a constant rate. 
D) If the money supply grows at the same rate as growth in YP, the price level will also increase at the same rate as growth in YP.

Question 5

Figure 16-3
  
-Refer to Figure 16-3.Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course.He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following movements represents the statement?

Accepted Answer

A) the movement from A to B 
B) the movement from B to C 
C) the movement from C to D 
D) the movement from C to B 
A) the movement from A to B 
B) the movement from B to C 
C) the movement from C to D 
D) the movement from C to B

Question 6

Figure 16-3
  
-Refer to Figure 16-3.Consider the following statement: "The nation's inflation rate rose to a record high last month, the government reported yesterday.The consumer price index jumped 0.3% in January.Coupled with the announcement earlier this month that unemployment had risen by 0.5 percentage points, the reports suggested that the first month of President Nixon's second term had gotten off to a rocky start." Which of the following movements represents the statement?

Accepted Answer

A) the movement from A to B 
B) the movement from B to C 
C) the movement from C to D 
D) the movement from C to B 
A) the movement from A to B 
B) the movement from B to C 
C) the movement from C to D 
D) the movement from C to B

Question 7

In the long-run, only a change in the _______ is likely to affect the inflation rate associated With a particular rate of growth in the money supply.

Accepted Answer

A) aggregate demand 
B) short-run aggregate supply 
C) rate of economic growth 
D) expectations about the price level 
A) aggregate demand 
B) short-run aggregate supply 
C) rate of economic growth 
D) expectations about the price level

Question 8

In the Phillips phase of the inflation-unemployment cycle, real GDP rises and inflation falls.

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-7
  
-Refer to Figure 16-7.The movement from point 3 to point 4 is consistent with which phase Of the inflation-unemployment cycle?

Accepted Answer

A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment is closer to its natural rate 
C) stagflation phase because inflation and unemployment have risen 
D) recovery phase because the inflationary gap has been eliminated 
A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment is closer to its natural rate 
C) stagflation phase because inflation and unemployment have risen 
D) recovery phase because the inflationary gap has been eliminated

Question 10

In the graph of the inflation-unemployment cycle, the variable on the horizontal axis is _____ and the variable on the vertical axis is _______.

Accepted Answer

A) real GDP; price level 
B) price level; unemployment rate 
C) unemployment rate; inflation rate 
D) inflation rate; unemployment rate 
A) real GDP; price level 
B) price level; unemployment rate 
C) unemployment rate; inflation rate 
D) inflation rate; unemployment rate

Question 11

Stagflation implies that

Accepted Answer

A) policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation. 
B) a tradeoff between inflation and unemployment may not always exist. 
C) any relationship between the inflation and unemployment was purely random. 
D) the relationship predicted by the Phillips curve is stable. 
A) policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation. 
B) a tradeoff between inflation and unemployment may not always exist. 
C) any relationship between the inflation and unemployment was purely random. 
D) the relationship predicted by the Phillips curve is stable.

Question 12

The Phillips phase of the inflation-unemployment cycle emerges because

Accepted Answer

A) prices and wages are flexible. 
B) nominal wages and prices fall. 
C) of unanticipated increases in the price level produced by increases in aggregate demand. 
D) people are reluctant to spend despite expansionary policies pursued by policymakers. 
A) prices and wages are flexible. 
B) nominal wages and prices fall. 
C) of unanticipated increases in the price level produced by increases in aggregate demand. 
D) people are reluctant to spend despite expansionary policies pursued by policymakers.

Question 13

Figure 16-3
  
-Refer to Figure 16-3.Which of the following movements represents the Phillips phase?

Accepted Answer

A) the movement from A to B 
B) the movement from B to C 
C) the movement from C to D 
D) the movement from B to A 
A) the movement from A to B 
B) the movement from B to C 
C) the movement from C to D 
D) the movement from B to A

Question 14

Figure 16-8
  
-Refer to Figure 16-8.The movement from point 4 to point 5 is consistent with which phase Of the inflation-unemployment cycle?

Accepted Answer

A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment has fallen 
C) growth phase because the economy is producing above its potential output 
D) recovery phase because inflation and unemployment have fallen 
A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment has fallen 
C) growth phase because the economy is producing above its potential output 
D) recovery phase because inflation and unemployment have fallen

Question 15

If the efficiency wage theory holds,

Accepted Answer

A) only highly qualified, efficient workers get the jobs. 
B) the labor market clears at the equilibrium wage rate in the long-run. 
C) workers with jobs will receive high wages and workers without jobs would be willing to work for lower wages but are closed out of the market. 
D) the labor market is efficient. 
A) only highly qualified, efficient workers get the jobs. 
B) the labor market clears at the equilibrium wage rate in the long-run. 
C) workers with jobs will receive high wages and workers without jobs would be willing to work for lower wages but are closed out of the market. 
D) the labor market is efficient.

Question 16

Which of the following statements is true of the U.S.experience with regards to the Phillips curve hypothesis?
I.Annual observations of inflation and unemployment from 1961 to 2008 seem consistent with a Phillips curve.
II.A Phillips curve relationship best fits observations of inflation and unemployment in the 1960s.
III.The Phillips curve relationship in the inflation and unemployment data began to disintegrate in the 1970s.

Accepted Answer

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

Question 17

The inflation-unemployment cycle tends to follow three distinct phases-Phillips, stagflation, and recovery.

Accepted Answer

A) True 
 B)False

Question 18

Figure 16-8
  
-Refer to Figure 16-8.The movement from point 3 to point 4 is consistent with which Segment in the diagram below?

Accepted Answer

A) segment A to D 
B) segment A to B 
C) segment B to C 
D) segment C to D 
A) segment A to D 
B) segment A to B 
C) segment B to C 
D) segment C to D

Question 19

A Phillips curve implies

Accepted Answer

A) a negative relationship between consumption and saving. 
B) a positive relationship between inflation and prices. 
C) a negative relationship between inflation and unemployment. 
D) a positive relationship between consumption expenditure and inflation. 
A) a negative relationship between consumption and saving. 
B) a positive relationship between inflation and prices. 
C) a negative relationship between inflation and unemployment. 
D) a positive relationship between consumption expenditure and inflation.

Question 20

Suppose an economy is operating with an inflationary gap.In this case, policymakers would Seek to move the economy

Accepted Answer

A) back down the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
B) up the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
C) back down the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
D) up the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
A) back down the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
B) up the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
C) back down the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
D) up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

Exam 31: Macro Inflation and Unemployment

In the long run, unemployment will be at the natural rate.This implies that

If the efficiency wage theory holds,

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP)in the long run?

In the long-run, only a change in the _______ is likely to affect the inflation rate associated With a particular rate of growth in the money supply.

In the Phillips phase of the inflation-unemployment cycle, real GDP rises and inflation falls.

Figure 16-7 -Refer to Figure 16-7.The movement from point 3 to point 4 is consistent with which phase Of the inflation-unemployment cycle?

In the graph of the inflation-unemployment cycle, the variable on the horizontal axis is _____ and the variable on the vertical axis is _______.

Stagflation implies that

The Phillips phase of the inflation-unemployment cycle emerges because

Figure 16-3 -Refer to Figure 16-3.Which of the following movements represents the Phillips phase?

Figure 16-8 -Refer to Figure 16-8.The movement from point 4 to point 5 is consistent with which phase Of the inflation-unemployment cycle?

If the efficiency wage theory holds,

The inflation-unemployment cycle tends to follow three distinct phases-Phillips, stagflation, and recovery.

Figure 16-8 -Refer to Figure 16-8.The movement from point 3 to point 4 is consistent with which Segment in the diagram below?

A Phillips curve implies

Suppose an economy is operating with an inflationary gap.In this case, policymakers would Seek to move the economy

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

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P)in the long run?

In the graph of the inflation-unemployment cycle, the variable on the horizontal axis is _ and the variable on the vertical axis is ___.