Question 1

If taxes rise, then aggregate demand shifts

Accepted Answer

A) right, making unemployment higher than otherwise. 
B) right, making unemployment lower than otherwise. 
C) left, making unemployment higher than otherwise. 
D) left, making unemployment lower than otherwise. 
A) right, making unemployment higher than otherwise. 
B) right, making unemployment lower than otherwise. 
C) left, making unemployment higher than otherwise. 
D) left, making unemployment lower than otherwise.

Question 2

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 3

The long-run Phillips curve would shift left if

Accepted Answer

A) the money supply increased or if the minimum wage was reduced. 
B) the money supply increased but not if the minimum wage was reduced. 
C) the minimum wage was reduced but not if the money supply increased. 
D) None of the above is correct. 
A) the money supply increased or if the minimum wage was reduced. 
B) the money supply increased but not if the minimum wage was reduced. 
C) the minimum wage was reduced but not if the money supply increased. 
D) None of the above is correct.

Question 4

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Accepted Answer

A) lowers both inflation and unemployment. 
B) lowers inflation but raises unemployment. 
C) raises inflation but lowers unemployment. 
D) raises both inflation and unemployment. 
A) lowers both inflation and unemployment. 
B) lowers inflation but raises unemployment. 
C) raises inflation but lowers unemployment. 
D) raises both inflation and unemployment.

Question 5

Suppose that money supply growth increases. In the long run, this increases employment according to

Accepted Answer

A) both the long-run Phillips curve and the aggregate demand and aggregate supply model. 
B) neither the long-run Phillips curve nor the aggregate demand and aggregate supply model. 
C) the long-run Phillips curve, but not the aggregate demand and aggregate supply model. 
D) the aggregate demand and aggregate supply model, but not the long-run Phillips curve 
A) both the long-run Phillips curve and the aggregate demand and aggregate supply model. 
B) neither the long-run Phillips curve nor the aggregate demand and aggregate supply model. 
C) the long-run Phillips curve, but not the aggregate demand and aggregate supply model. 
D) the aggregate demand and aggregate supply model, but not the long-run Phillips curve

Question 6

By raising aggregate demand more than anticipated, policymakers

Accepted Answer

A) reduce unemployment for awhile. 
B) raise unemployment for awhile. 
C) reduce unemployment permanently. 
D) None of the above is correct. 
A) reduce unemployment for awhile. 
B) raise unemployment for awhile. 
C) reduce unemployment permanently. 
D) None of the above is correct.

Question 7

Figure 35-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate.    
-Refer to Figure 35-1. The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Accepted Answer

A) that applies both in the short run and in the long run. 
B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. 
C) of inflation and unemployment. 
D) All of the above are correct. 
A) that applies both in the short run and in the long run. 
B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. 
C) of inflation and unemployment. 
D) All of the above are correct.

Question 8

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Accepted Answer

The answer of A central bank pledges to reduce the...

Question 9

The equation,
​
Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation),
​

Accepted Answer

A) is the equation of the short-run Phillips curve. 
B) implies there can be no stable short-run Phillips curve. 
C) reflects the reasoning of Friedman and Phelps. 
D) All of the above are correct. 
A) is the equation of the short-run Phillips curve. 
B) implies there can be no stable short-run Phillips curve. 
C) reflects the reasoning of Friedman and Phelps. 
D) All of the above are correct.

Question 10

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

A) should not see an increase in the unemployment rate even in the short run. 
B) will having rising unemployment for a while, but then return to the natural rate of unemployment. 
C) will have a permanently higher unemployment rate. 
D) None of the above is suggested by the arguments of Friedman and Phelps. 
A) should not see an increase in the unemployment rate even in the short run. 
B) will having rising unemployment for a while, but then return to the natural rate of unemployment. 
C) will have a permanently higher unemployment rate. 
D) None of the above is suggested by the arguments of Friedman and Phelps.

Question 11

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Accepted Answer

A) the short-run and long-run Phillips curves left. 
B) the short-run and long-run Phillips curves right. 
C) only the short-run Phillips curve left. 
D) only the short-run Phillips curve right. 
A) the short-run and long-run Phillips curves left. 
B) the short-run and long-run Phillips curves right. 
C) only the short-run Phillips curve left. 
D) only the short-run Phillips curve right.

Question 12

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

Accepted Answer

A) both the long-run Phillips curve and the aggregate supply and aggregate demand model. 
B) the aggregate demand and aggregate supply model, but not the long-run Phillips curve. 
C) the long-run Phillips curve, but not the aggregate demand and aggregate supply model. 
D) neither the long-run Phillips curve nor the aggregate supply and aggregate demand model. 
A) both the long-run Phillips curve and the aggregate supply and aggregate demand model. 
B) the aggregate demand and aggregate supply model, but not the long-run Phillips curve. 
C) the long-run Phillips curve, but not the aggregate demand and aggregate supply model. 
D) neither the long-run Phillips curve nor the aggregate supply and aggregate demand model.

Question 13

If the government raises government expenditures, then in the short run prices

Accepted Answer

A) rise and unemployment falls. 
B) fall and unemployment rises. 
C) and unemployment rise. 
D) and unemployment fall. 
A) rise and unemployment falls. 
B) fall and unemployment rises. 
C) and unemployment rise. 
D) and unemployment fall.

Question 14

If there is an adverse supply shock, then

Accepted Answer

A) unemployment rises and the short-run Phillips curve shifts right. 
B) unemployment rises and the short-run Phillips curve shifts left. 
C) unemployment falls and the short-run Phillips curve shifts right. 
D) unemployment falls and the short-run Phillips curve shifts left. 
A) unemployment rises and the short-run Phillips curve shifts right. 
B) unemployment rises and the short-run Phillips curve shifts left. 
C) unemployment falls and the short-run Phillips curve shifts right. 
D) unemployment falls and the short-run Phillips curve shifts left.

Question 15

Other things the same, a decrease in aggregate demand decreases both inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 16

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Accepted Answer

A) both the short and long run. 
B) the short run, but not the long run. 
C) the long run, but not the short run. 
D) neither the short nor the long run. 
A) both the short and long run. 
B) the short run, but not the long run. 
C) the long run, but not the short run. 
D) neither the short nor the long run.

Question 17

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect

Accepted Answer

A) both the unemployment rate and the inflation rate. 
B) the unemployment rate but not the inflation rate. 
C) the inflation rate but not the unemployment rate. 
D) neither the inflation rate nor the unemployment rate. 
A) both the unemployment rate and the inflation rate. 
B) the unemployment rate but not the inflation rate. 
C) the inflation rate but not the unemployment rate. 
D) neither the inflation rate nor the unemployment rate.

Question 18

A central bank announces it will decrease the inflation rate by 10 percentage points. People are skeptical of the announcement, but do expect the central bank will reduce inflation by 5 percentage points and so expected inflation falls by 5 percentage points. If the central bank decreases inflation by only 3 percentage points then the unemployment rate will fall.

Accepted Answer

A) True 
 B)False

Question 19

If the unemployment rate is below the natural rate, then

Accepted Answer

A) inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right. 
B) inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
C) inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
D) inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right. 
A) inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right. 
B) inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
C) inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
D) inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right.

Question 20

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

If taxes rise, then aggregate demand shifts

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

The long-run Phillips curve would shift left if

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Suppose that money supply growth increases. In the long run, this increases employment according to

By raising aggregate demand more than anticipated, policymakers

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

The equation, ​ Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation), ​

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

If the government raises government expenditures, then in the short run prices

If there is an adverse supply shock, then

Other things the same, a decrease in aggregate demand decreases both inflation and unemployment.

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect

If the unemployment rate is below the natural rate, then

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

Filters

The equation, Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation),