Question 1

The long-run response to a decrease in the money supply growth rate 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 2

Samuelson and Solow argued that

Accepted Answer

A) high unemployment puts upward pressures on wages and prices. 
B) given the historical evidence, a combination of low inflation and low unemployment was not possible. 
C) Both A and B are correct. 
D) None of the above are correct. 
A) high unemployment puts upward pressures on wages and prices. 
B) given the historical evidence, a combination of low inflation and low unemployment was not possible. 
C) Both A and B are correct. 
D) None of the above are correct.

Question 3

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Accepted Answer

A) higher unemployment and lower inflation 
B) lower unemployment and higher inflation 
C) higher unemployment and the same level of inflation 
D) lower unemployment and the same level of inflation 
A) higher unemployment and lower inflation 
B) lower unemployment and higher inflation 
C) higher unemployment and the same level of inflation 
D) lower unemployment and the same level of inflation

Question 4

Which of the following describes the Volcker disinflation most accurately?

Accepted Answer

A) Almost all of the public believed that the Fed would keep money growth low, so unemployment rose less than it would have otherwise. 
B) Almost all of the public believed that the Fed would keep money growth low, so unemployment rose more than it would have otherwise. 
C) Much of the public did not believe that the Fed would keep money growth low, so unemployment rose less than it would have otherwise. 
D) Much of the public did not believe that the Fed would keep money growth low, so unemployment rose more than it would have otherwise. 
A) Almost all of the public believed that the Fed would keep money growth low, so unemployment rose less than it would have otherwise. 
B) Almost all of the public believed that the Fed would keep money growth low, so unemployment rose more than it would have otherwise. 
C) Much of the public did not believe that the Fed would keep money growth low, so unemployment rose less than it would have otherwise. 
D) Much of the public did not believe that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.

Question 5

Which of the following increases inflation and reduces unemployment in the short run?

Accepted Answer

A) either an increase in government expenditures by itself or an increase in the money supply growth rate by itself 
B) an increase in government expenditures, but not an increase in the money supply growth rate 
C) an increase in the money supply growth rate, but not an increase in government expenditures 
D) neither an increase in government expenditures nor an increase in the money supply 
A) either an increase in government expenditures by itself or an increase in the money supply growth rate by itself 
B) an increase in government expenditures, but not an increase in the money supply growth rate 
C) an increase in the money supply growth rate, but not an increase in government expenditures 
D) neither an increase in government expenditures nor an increase in the money supply

Question 6

Suppose that a drought significantly reduces agricultural production one year. In addition, suppose the Fed accommodates this supply shock by implementing an expansionary monetary policy. Which of the following would you expect to occur as a result of these changes?

Accepted Answer

A) The short-run aggregate supply curve will shift to the right, the short-run Phillips Curve will shift to the left, and the accommodating monetary policy will raise inflation while lowering unemployment. 
B) The short-run aggregate supply curve will shift to the right, the short-run Phillips Curve will shift to the left, and the accommodating monetary policy will increase unemployment while lowering inflation. 
C) The short-run aggregate supply curve will shift to the left, the short-run Phillips Curve will shift to the right, and the accommodating monetary policy will raise inflation while lowering unemployment. 
D) The short-run aggregate supply curve will shift to the left, the short-run Phillips Curve will shift to the right, and the accommodating monetary policy will increase unemployment while lowering inflation. 
A) The short-run aggregate supply curve will shift to the right, the short-run Phillips Curve will shift to the left, and the accommodating monetary policy will raise inflation while lowering unemployment. 
B) The short-run aggregate supply curve will shift to the right, the short-run Phillips Curve will shift to the left, and the accommodating monetary policy will increase unemployment while lowering inflation. 
C) The short-run aggregate supply curve will shift to the left, the short-run Phillips Curve will shift to the right, and the accommodating monetary policy will raise inflation while lowering unemployment. 
D) The short-run aggregate supply curve will shift to the left, the short-run Phillips Curve will shift to the right, and the accommodating monetary policy will increase unemployment while lowering inflation.

Question 7

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Accepted Answer

A) moving to the right along the short-run Phillips curve. 
B) moving to the left along the short-run Phillips curve. 
C) shifting the short-run Phillips curve right. 
D) shifting the short-run Phillips curve left. 
A) moving to the right along the short-run Phillips curve. 
B) moving to the left along the short-run Phillips curve. 
C) shifting the short-run Phillips curve right. 
D) shifting the short-run Phillips curve left.

Question 8

Figure 35-5  
-Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

Accepted Answer

A) A, B 
B) A, D 
C) C, B 
D) None of the above is correct. 
A) A, B 
B) A, D 
C) C, B 
D) None of the above is correct.

Question 9

France has a higher natural rate of unemployment than the United States. This suggests that

Accepted Answer

A) France is at a higher point on its long-run Phillips curve and so has higher inflation than the United States. 
B) France is at a lower point on its long-run Phillips curve and so has lower inflation than the United States. 
C) France's Phillips curve is to the left of that of the United States, possibly because they have higher inflation. 
D) France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation. 
A) France is at a higher point on its long-run Phillips curve and so has higher inflation than the United States. 
B) France is at a lower point on its long-run Phillips curve and so has lower inflation than the United States. 
C) France's Phillips curve is to the left of that of the United States, possibly because they have higher inflation. 
D) France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.

Question 10

Friedman and Phelps concluded that

Accepted Answer

A) in the long run the Phillips curve is downward sloping, which is consistent with classical theory. 
B) in the long run the Philips curve is downward sloping, which is inconsistent with classical theory. 
C) in the long run the Phillips curve is vertical, which is consistent with classical theory. 
D) in the long run the Phillips curve is vertical, which is inconsistent with classical theory. 
A) in the long run the Phillips curve is downward sloping, which is consistent with classical theory. 
B) in the long run the Philips curve is downward sloping, which is inconsistent with classical theory. 
C) in the long run the Phillips curve is vertical, which is consistent with classical theory. 
D) in the long run the Phillips curve is vertical, which is inconsistent with classical theory.

Question 11

Refer to The Economy in 2008. The short-run effects of rising world commodity prices are shown by

Accepted Answer

A) moving to the right along the short-run Phillips curve. 
B) moving to the left along the short-run Phillips curve. 
C) shifting the short-run Phillips curve right. 
D) shifting the short-run Phillips curve left. 
A) moving to the right along the short-run Phillips curve. 
B) moving to the left along the short-run Phillips curve. 
C) shifting the short-run Phillips curve right. 
D) shifting the short-run Phillips curve left.

Question 12

U.S. net exports fall due to recessions in foreign countries.
A. According to the aggregate demand and supply model, what happens to the price level and output in the short run?
B. According to the short-run Phillips curve what happens to inflation and unemployment in the short run?
C. If the Fed wanted to reverse the effects of this shock on output, what should it do?

Accepted Answer

A. The price level and output

Question 13

Figure 35-6
Use the graph below to answer the following questions.  
-Refer to Figure 35-6. Curve 2 is the

Accepted Answer

A) long-run Phillips curve. 
B) short-run Phillips curve. 
C) long-run aggregate demand curve. 
D) short-run aggregate demand curve. 
A) long-run Phillips curve. 
B) short-run Phillips curve. 
C) long-run aggregate demand curve. 
D) short-run aggregate demand curve.

Question 14

Disinflation would eventually cause

Accepted Answer

A) the short-run and the long run Phillips curve to shift right. 
B) the short-run and the long run Phillips curve to shift left. 
C) the short-run Phillips curve but not the long run Phillips curve to shift right. 
D) the short-run Phillips curve but not the long run Phillips curve to shift left. 
A) the short-run and the long run Phillips curve to shift right. 
B) the short-run and the long run Phillips curve to shift left. 
C) the short-run Phillips curve but not the long run Phillips curve to shift right. 
D) the short-run Phillips curve but not the long run Phillips curve to shift left.

Question 15

Friedman and Phelps believed that the natural rate of unemployment was constant.

Accepted Answer

A) True 
 B)False

Question 16

One way to express the classical idea of monetary neutrality is to draw

Accepted Answer

A) a downward-sloping short-run Phillips curve. 
B) an upward-sloping short-run Phillips curve. 
C) a downward-sloping long-run Phillips curve. 
D) a vertical long-run Phillips curve. 
A) a downward-sloping short-run Phillips curve. 
B) an upward-sloping short-run Phillips curve. 
C) a downward-sloping long-run Phillips curve. 
D) a vertical long-run Phillips curve.

Question 17

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Accepted Answer

A) 1. 
B) 2. 
C) 3. 
D) None of the above is correct. 
A) 1. 
B) 2. 
C) 3. 
D) None of the above is correct.

Question 18

Contractionary monetary policy

Accepted Answer

A) leads to disinflation and makes the short-run Phillips curve shift right. 
B) leads to disinflation and makes the short-run Phillips curve shift left. 
C) does not lead to disinflation but makes the short-run Phillips curve shift right. 
D) does not lead to disinflation but makes the short-run Phillips curve shift left. 
A) leads to disinflation and makes the short-run Phillips curve shift right. 
B) leads to disinflation and makes the short-run Phillips curve shift left. 
C) does not lead to disinflation but makes the short-run Phillips curve shift right. 
D) does not lead to disinflation but makes the short-run Phillips curve shift left.

Question 19

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Accepted Answer

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

Question 20

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Accepted Answer

fall. Eventually inflation exp

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

The long-run response to a decrease in the money supply growth rate is shown by shifting

Samuelson and Solow argued that

Other things the same, in the long run a country that reduces the minimum wage from very high levels will have

Which of the following describes the Volcker disinflation most accurately?

Which of the following increases inflation and reduces unemployment in the short run?

Suppose that a drought significantly reduces agricultural production one year. In addition, suppose the Fed accommodates this supply shock by implementing an expansionary monetary policy. Which of the following would you expect to occur as a result of these changes?

Refer to The Economy in 2008. The short-run effects of the housing and financial crisis are shown by

Figure 35-5 -Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

France has a higher natural rate of unemployment than the United States. This suggests that

Friedman and Phelps concluded that

Refer to The Economy in 2008. The short-run effects of rising world commodity prices are shown by

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. Curve 2 is the

Disinflation would eventually cause

Friedman and Phelps believed that the natural rate of unemployment was constant.

One way to express the classical idea of monetary neutrality is to draw

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Contractionary monetary policy

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth 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

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