Question 1

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 2

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

Accepted Answer

A) both the short-run and the long-run Phillips curves 
B) neither the short-run nor the long-run Phillips curves 
C) only the short-run Phillips curve 
D) only the long-run Phillips curve 
A) both the short-run and the long-run Phillips curves 
B) neither the short-run nor the long-run Phillips curves 
C) only the short-run Phillips curve 
D) only the long-run Phillips curve

Question 3

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Accepted Answer

A) The change in inflation, but not the change in unemployment is consistent with what a given short-run Phillips curve implies. 
B) The change in unemployment, but not the change in inflation is consistent with what a given short-run Phillips curve implies. 
C) Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies. 
D) Neither the change in inflation nor the change in unemployment are consistent with what a given short-run Phillips curve implies. 
A) The change in inflation, but not the change in unemployment is consistent with what a given short-run Phillips curve implies. 
B) The change in unemployment, but not the change in inflation is consistent with what a given short-run Phillips curve implies. 
C) Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies. 
D) Neither the change in inflation nor the change in unemployment are consistent with what a given short-run Phillips curve implies.

Question 4

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

Accepted Answer

The short-run Phillips curve s

Question 5

In the 1970s, the Fed accommodated a(n)

Accepted Answer

A) adverse supply shock and so contributed to higher inflation. 
B) adverse supply shock and so contributed to lower inflation. 
C) favorable supply shock and so contributed to higher inflation. 
D) favorable supply shock and so contributed to lower inflation. 
A) adverse supply shock and so contributed to higher inflation. 
B) adverse supply shock and so contributed to lower inflation. 
C) favorable supply shock and so contributed to higher inflation. 
D) favorable supply shock and so contributed to lower inflation.

Question 6

An increase in the natural rate of unemployment shifts the short-run Phillips curve to the _____. If the central bank sees the increase in the unemployment rate, but thinks the natural rate has remained the same and so wants to reduce unemployment, it would ________ the money supply growth rate. If it maintains this money supply growth rate, eventually the short run Phillips curve will shift _____ and unemployment will be _____.

Accepted Answer

right, increase, rig

Question 7

If expected inflation increases, which of the following shifts right?

Accepted Answer

A) both the short-run and the long-run Phillips curves 
B) the short-run but not the long-run Phillips curve 
C) the long-run but not the short-run Phillips curve 
D) neither the long-run nor the short-run Phillips curve 
A) both the short-run and the long-run Phillips curves 
B) the short-run but not the long-run Phillips curve 
C) the long-run but not the short-run Phillips curve 
D) neither the long-run nor the short-run Phillips curve

Question 8

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

Accepted Answer

A) True 
 B)False

Question 9

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A) an increase in the natural rate of unemployment or expansionary monetary policy. 
B) expansionary monetary policy, but not an increase in the natural rate of unemployment. 
C) an increase in the natural rate of unemployment or a contractionary monetary policy. 
D) contractionary monetary policy, but not an increase in the natural rate of unemployment. 
A) an increase in the natural rate of unemployment or expansionary monetary policy. 
B) expansionary monetary policy, but not an increase in the natural rate of unemployment. 
C) an increase in the natural rate of unemployment or a contractionary monetary policy. 
D) contractionary monetary policy, but not an increase in the natural rate of unemployment.

Question 10

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

Accepted Answer

It would r

Question 11

Which of the following is correct according to the long-run Phillips curve?

Accepted Answer

A) No government policy, including changes in the money supply growth rate, can change the natural rate of unemployment. 
B) Changes in the money supply growth rate are the only means by which government policy can change the natural rate of unemployment. 
C) Monetary policy cannot change the natural rate of unemployment, but other government policies can. 
D) Monetary policy and other government policies can shift the long-run Phillips curve. 
A) No government policy, including changes in the money supply growth rate, can change the natural rate of unemployment. 
B) Changes in the money supply growth rate are the only means by which government policy can change the natural rate of unemployment. 
C) Monetary policy cannot change the natural rate of unemployment, but other government policies can. 
D) Monetary policy and other government policies can shift the long-run Phillips curve.

Question 12

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Accepted Answer

A) True 
 B)False

Question 13

An adverse supply shock will cause output

Accepted Answer

A) and prices to rise. 
B) and prices to fall. 
C) to rise and prices to fall. 
D) to fall and prices to rise. 
A) and prices to rise. 
B) and prices to fall. 
C) to rise and prices to fall. 
D) to fall and prices to rise.

Question 14

If there is an increase in the price of oil, then

Accepted Answer

A) unemployment rises. If the central bank tries to counter this increase, inflation rises. 
B) unemployment rises. If the central bank tries to counter this increase, inflation falls. 
C) unemployment falls. If the central bank tries to counter this decrease, inflation falls. 
D) unemployment falls. If the central bank tries to counter this decrease, inflation rises. 
A) unemployment rises. If the central bank tries to counter this increase, inflation rises. 
B) unemployment rises. If the central bank tries to counter this increase, inflation falls. 
C) unemployment falls. If the central bank tries to counter this decrease, inflation falls. 
D) unemployment falls. If the central bank tries to counter this decrease, inflation rises.

Question 15

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Accepted Answer

A) downward-sloping, which implies that monetary and fiscal policies can influence the level of unemployment in the long run. 
B) downward-sloping, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run. 
C) vertical, which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run. 
D) vertical, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run. 
A) downward-sloping, which implies that monetary and fiscal policies can influence the level of unemployment in the long run. 
B) downward-sloping, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run. 
C) vertical, which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run. 
D) vertical, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.

Question 16

As an economist working for a U.S. government agency you determine that a particular country has a sacrifice ratio of 3. Policy-makers in that country are thinking of lowering the inflation rate from 10% to 4%. Is this sacrifice ratio higher or lower than the typical estimate? From your numbers, what is the amount of output that will be lost for this country to reduce its inflation rate?

Accepted Answer

A) The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
B) The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual output to reach the new inflation target. 
C) The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
D) The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual output to reach the new inflation target. 
A) The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
B) The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual output to reach the new inflation target. 
C) The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
D) The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual output to reach the new inflation target.

Question 17

Figure 35-6
Use the graph below to answer the following questions.  
-Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

Accepted Answer

A) B. 
B) C. 
C) F. 
D) None of the above is consistent with a decrease in the money supply growth rate. 
A) B. 
B) C. 
C) F. 
D) None of the above is consistent with a decrease in the money supply growth rate.

Question 18

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A) increase the rate at which the money supply increases. This will also move inflation closer to its previous rate.. 
B) increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate 
C) decrease the rate at which the money supply increases. This will also move inflation closer to its original rate 
D) decrease the rate at which the money supply increases. However, this will make higher than its previous rate. 
A) increase the rate at which the money supply increases. This will also move inflation closer to its previous rate.. 
B) increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate 
C) decrease the rate at which the money supply increases. This will also move inflation closer to its original rate 
D) decrease the rate at which the money supply increases. However, this will make higher than its previous rate.

Question 19

When aggregate demand shifts left along the short-run aggregate supply curve,

Accepted Answer

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

Question 20

In the long run a reduction in the money supply growth rate affects

Accepted Answer

A) the inflation rate and the natural rate of unemployment. 
B) the inflation rate but not the natural rate of unemployment. 
C) neither the inflation rate nor the natural rate of unemployment. 
D) the natural rate of unemployment, but not the inflation rate. 
A) the inflation rate and the natural rate of unemployment. 
B) the inflation rate but not the natural rate of unemployment. 
C) neither the inflation rate nor the natural rate of unemployment. 
D) the natural rate of unemployment, but not the inflation rate.

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

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which curve shifts to the left?

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?

In the 1970s, the Fed accommodated a(n)

If expected inflation increases, which of the following shifts right?

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

A movement to the right along a given short-run Phillips curve could be caused by

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

Which of the following is correct according to the long-run Phillips curve?

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

An adverse supply shock will cause output

If there is an increase in the price of oil, then

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate decreases, in the short run the economy moves to

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

When aggregate demand shifts left along the short-run aggregate supply curve,

In the long run a reduction in the money supply growth rate affects

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

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