Question 1

Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies

Accepted Answer

A) have been focused on moving the economy to its potential output. 
B) have clearly shown a reduced tolerance for inflation. 
C) were concentrated on bringing the price of oil down. 
D) have moved toward restraining growth in financial markets. 
A) have been focused on moving the economy to its potential output. 
B) have clearly shown a reduced tolerance for inflation. 
C) were concentrated on bringing the price of oil down. 
D) have moved toward restraining growth in financial markets.

Question 2

In the three phases of the inflation-unemployment cycle, during the stagflation phase,

Accepted Answer

A) inflation and unemployment both increase. 
B) inflation and unemployment stay the same. 
C) inflation and unemployment both decrease. 
D) unemployment decreases and inflation increases. 
A) inflation and unemployment both increase. 
B) inflation and unemployment stay the same. 
C) inflation and unemployment both decrease. 
D) unemployment decreases and inflation increases.

Question 3

The efficiency-wage theory holds that the market equilibrium wage is the efficient wage.

Accepted Answer

A) True 
 B)False

Question 4

The reservation wage tends to increase as the duration of unemployment increases.

Accepted Answer

A) True 
 B)False

Question 5

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%$\Delta$P) Can be expressed as

Accepted Answer

A) %$\Delta$P = %$\Delta$M ÷ %$\Delta$Y 
B) %$\Delta$P = %$\Delta$M + %$\Delta$Y 
C) %$\Delta$P = %$\Delta$M * %$\Delta$Y 
D) %$\Delta$P = %$\Delta$M -%$\Delta$Y 
A) %$\Delta$P = %$\Delta$M ÷ %$\Delta$Y 
B) %$\Delta$P = %$\Delta$M + %$\Delta$Y 
C) %$\Delta$P = %$\Delta$M * %$\Delta$Y 
D) %$\Delta$P = %$\Delta$M -%$\Delta$Y

Question 6

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell.With which phase of the inflation-unemployment cycle does this conform to?

Accepted Answer

A) Phillips phase 
B) Growth phase 
C) Stagflation phase 
D) Recovery phase 
A) Phillips phase 
B) Growth phase 
C) Stagflation phase 
D) Recovery phase

Question 7

What is the inflation-unemployment cycle?

Accepted Answer

A) It refers to cyclical pattern of inflation and unemployment suggested by inflation and unemployment data for the U.S.between 1960 and 2000. 
B) It refers to a recurring tradeoff between inflation and unemployment suggested by inflation and unemployment data for the U.S.between 1960 and 2000. 
C) It refers to the cyclical pattern of expansions and contractions in the level of economic activity for the U.S.between 1960 and 2000. 
D) It refers to the cyclical pattern of inflation-productivity and deflation-unemployment experienced by most industrialized countries. 
A) It refers to cyclical pattern of inflation and unemployment suggested by inflation and unemployment data for the U.S.between 1960 and 2000. 
B) It refers to a recurring tradeoff between inflation and unemployment suggested by inflation and unemployment data for the U.S.between 1960 and 2000. 
C) It refers to the cyclical pattern of expansions and contractions in the level of economic activity for the U.S.between 1960 and 2000. 
D) It refers to the cyclical pattern of inflation-productivity and deflation-unemployment experienced by most industrialized countries.

Question 8

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." Identify the stage of the inflation-unemployment cycle.

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 9

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 toward an unemployment rate that is closer to the natural rate of unemployment. 
B) up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
C) back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
D) up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
A) back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
B) up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
C) back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
D) up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.

Question 10

The essential feature of the stagflation phase of the inflation-unemployment cycle is

Accepted Answer

A) a shift in the short run aggregate supply curve to the right. 
B) changes in expectations about the price level. 
C) falling unemployment and rising inflation. 
D) a shift of the LRAS curve to the right. 
A) a shift in the short run aggregate supply curve to the right. 
B) changes in expectations about the price level. 
C) falling unemployment and rising inflation. 
D) a shift of the LRAS curve to the right.

Question 11

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap.The Nixon administration rationalized that through a combination of a government spending cuts and a decrease in the money growth rate, it could successfully

Accepted Answer

A) reduce inflation, which would then cause unemployment to fall. 
B) get the economy to slide down along the Phillips curve, thereby trading off a reduction in inflation for an increase in unemployment. 
C) halt any increases in the price level by increasing productivity which would then return the economy to its potential output. 
D) get the economy to slide up along the Phillips curve, thereby trading an increase in unemployment for deflation. 
A) reduce inflation, which would then cause unemployment to fall. 
B) get the economy to slide down along the Phillips curve, thereby trading off a reduction in inflation for an increase in unemployment. 
C) halt any increases in the price level by increasing productivity which would then return the economy to its potential output. 
D) get the economy to slide up along the Phillips curve, thereby trading an increase in unemployment for deflation.

Question 12

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Identify the stage of the inflation-unemployment cycle.

Accepted Answer

A) the stagflation phase 
B) the recovery phase 
C) the Phillips phase 
D) the growth phase 
A) the stagflation phase 
B) the recovery phase 
C) the Phillips phase 
D) the growth phase

Question 13

Figure 16-7
  
-Refer to Figure 16-7.At point 4, the economy is experiencing

Accepted Answer

A) an inflationary gap. 
B) a recessionary gap. 
C) long-run equilibrium. 
D) a recovery. 
A) an inflationary gap. 
B) a recessionary gap. 
C) long-run equilibrium. 
D) a recovery.

Question 14

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 money supply grows at a faster rate than growth in YP, there will be inflation. 
B) If the money supply grows at a slower rate than growth in YP, there will be a decrease in the inflation rate. 
C) If the money supply grows at the same rate as growth in YP, the price level will fall and there will be deflation. 
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 money supply grows at a faster rate than growth in YP, there will be inflation. 
B) If the money supply grows at a slower rate than growth in YP, there will be a decrease in the inflation rate. 
C) If the money supply grows at the same rate as growth in YP, the price level will fall and there will be deflation. 
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 15

The Phillips phase of the inflation-unemployment cycle emerges because wages are flexible and adjust more quickly than anticipated.

Accepted Answer

A) True 
 B)False

Question 16

Figure 16-3
  
-Refer to Figure 16-3.Which of the following represents the stagflation 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 A to C 
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 A to C

Question 17

The lowest wage that a worker would accept, if offered a job, is called

Accepted Answer

A) the reservation wage. 
B) a subsistence wage. 
C) the exploitation wage. 
D) the equilibrium market wage. 
A) the reservation wage. 
B) a subsistence wage. 
C) the exploitation wage. 
D) the equilibrium market wage.

Question 18

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Accepted Answer

A) excessive bank lending. 
B) potential crises in financial markets. 
C) inflation. 
D) excess aggregate demand. 
A) excessive bank lending. 
B) potential crises in financial markets. 
C) inflation. 
D) excess aggregate demand.

Question 19

Figure 16-1
  
-Refer to Figure 16-1.Consider point B where unemployment is relatively high and inflation
Is relatively low.In order to move up the curve toward point A, what fiscal policy measures
Should the policymakers undertake?

Accepted Answer

A) decrease taxes and government spending 
B) increase taxes and government spending 
C) increase taxes and decrease government spending 
D) decrease taxes and increase government spending 
A) decrease taxes and government spending 
B) increase taxes and government spending 
C) increase taxes and decrease government spending 
D) decrease taxes and increase government spending

Question 20

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession.Which of the Following best explains this move?

Accepted Answer

A) The Fed was concerned that the budget deficit would increase. 
B) The Fed had failed to take into account the lag in monetary policy. 
C) The Fed was taking explicit account of the lag in monetary policy. 
D) The Fed wanted to avert a potential housing market crisis. 
A) The Fed was concerned that the budget deficit would increase. 
B) The Fed had failed to take into account the lag in monetary policy. 
C) The Fed was taking explicit account of the lag in monetary policy. 
D) The Fed wanted to avert a potential housing market crisis.

Exam 31: Macro Inflation and Unemployment

Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies

In the three phases of the inflation-unemployment cycle, during the stagflation phase,

The efficiency-wage theory holds that the market equilibrium wage is the efficient wage.

The reservation wage tends to increase as the duration of unemployment increases.

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (% Δ\DeltaΔ P) Can be expressed as

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell.With which phase of the inflation-unemployment cycle does this conform to?

What is the inflation-unemployment cycle?

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

The essential feature of the stagflation phase of the inflation-unemployment cycle is

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap.The Nixon administration rationalized that through a combination of a government spending cuts and a decrease in the money growth rate, it could successfully

Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Identify the stage of the inflation-unemployment cycle.

Figure 16-7 -Refer to Figure 16-7.At point 4, the economy is experiencing

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?

The Phillips phase of the inflation-unemployment cycle emerges because wages are flexible and adjust more quickly than anticipated.

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

The lowest wage that a worker would accept, if offered a job, is called

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Figure 16-1 -Refer to Figure 16-1.Consider point B where unemployment is relatively high and inflation Is relatively low.In order to move up the curve toward point A, what fiscal policy measures Should the policymakers undertake?

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession.Which of the Following best explains this move?

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

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (% $\Delta$ P) Can be expressed as

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?