Question 1

In the long run, policy that changes aggregate demand changes

Accepted Answer

A) both unemployment and the price level. 
B) neither unemployment nor the price level. 
C) only unemployment. 
D) only the price level. 
A) both unemployment and the price level. 
B) neither unemployment nor the price level. 
C) only unemployment. 
D) only the price level.

Question 2

If the central bank increases the money supply, in the short run, the price level

Accepted Answer

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

Question 3

The long-run Phillips curve would shift to the left if

Accepted Answer

A) the money supply growth rate increased or if effective job-training programs were implemented. 
B) the money supply growth rate increased, but not if effective job-training programs were implemented. 
C) effective job-training programs were implemented, but not if the money supply growth rate increased. 
D) None of the above is correct. 
A) the money supply growth rate increased or if effective job-training programs were implemented. 
B) the money supply growth rate increased, but not if effective job-training programs were implemented. 
C) effective job-training programs were implemented, but not if the money supply growth rate increased. 
D) None of the above is correct.

Question 4

The Volcker disinflation

Accepted Answer

A) had virtually no impact on output, just as the classical dichotomy suggested. 
B) was associated with rising output, perhaps due to expansionary fiscal policy. 
C) caused output to fall, but by less than the typical estimate of the sacrifice ratio suggested. 
D) None of the above is correct. 
A) had virtually no impact on output, just as the classical dichotomy suggested. 
B) was associated with rising output, perhaps due to expansionary fiscal policy. 
C) caused output to fall, but by less than the typical estimate of the sacrifice ratio suggested. 
D) None of the above is correct.

Question 5

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Accepted Answer

A) of accommodative monetary policy. 
B) of disinflation. 
C) that was designed to reduce the unemployment rate. 
D) that produced results that were clearly consistent with those predicted by rational-expectations theorists. 
A) of accommodative monetary policy. 
B) of disinflation. 
C) that was designed to reduce the unemployment rate. 
D) that produced results that were clearly consistent with those predicted by rational-expectations theorists.

Question 6

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Accepted Answer

It returns

Question 7

If people believe that the central bank is going to reduce inflation, then

Accepted Answer

A) the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B) the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C) the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D) the short-run Phillips curve shifts left and the sacrifice ratio will fall. 
A) the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B) the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C) the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D) the short-run Phillips curve shifts left and the sacrifice ratio will fall.

Question 8

How are the effects of the financial crisis shown using the Phillips curve diagram?

Accepted Answer

As a move down along

Question 9

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Accepted Answer

A) True 
 B)False

Question 10

Disinflation is a reduction in

Accepted Answer

A) the price level. 
B) the inflation rate. 
C) the consumer price index. 
D) All of the above are correct. 
A) the price level. 
B) the inflation rate. 
C) the consumer price index. 
D) All of the above are correct.

Question 11

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Accepted Answer

A) both higher inflation and higher unemployment in the long run. 
B) higher inflation and no change in unemployment in the long run. 
C) the same inflation rate and lower unemployment in the long run. 
D) higher inflation and lower unemployment in the long run 
A) both higher inflation and higher unemployment in the long run. 
B) higher inflation and no change in unemployment in the long run. 
C) the same inflation rate and lower unemployment in the long run. 
D) higher inflation and lower unemployment in the long run

Question 12

In the long run, which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A) an increase in the minimum wage 
B) an increase in government spending 
C) an increase in the money supply 
D) a decrease in the money supply 
A) an increase in the minimum wage 
B) an increase in government spending 
C) an increase in the money supply 
D) a decrease in the money supply

Question 13

Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

Accepted Answer

A) In the short run, unemployment will increase and inflation will fall. 
B) ​In the short run, unemployment will increase and inflation will rise. 
C) ​In the short run, unemployment will decrease and inflation will rise. 
D) ​In the short run, unemployment will decrease and inflation will fall. 
A) In the short run, unemployment will increase and inflation will fall. 
B) ​In the short run, unemployment will increase and inflation will rise. 
C) ​In the short run, unemployment will decrease and inflation will rise. 
D) ​In the short run, unemployment will decrease and inflation will fall.

Question 14

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. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left-hand graph. Also suppose we know that the price index equaled 120 in 2011. Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Accepted Answer

A) 155 and 175, respectively. 
B) 138 and 156, respectively. 
C) 137.5 and 154.75, respectively. 
D) 135 and 150, respectively. 
A) 155 and 175, respectively. 
B) 138 and 156, respectively. 
C) 137.5 and 154.75, respectively. 
D) 135 and 150, respectively.

Question 15

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

Accepted Answer

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

Question 16

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Accepted Answer

A) True 
 B)False

Question 17

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Accepted Answer

The price level and output ris

Question 18

An adverse supply shock shifts the short-run Phillips curve to the left.

Accepted Answer

A) True 
 B)False

Question 19

If policymakers increase aggregate demand, then in the short run the price level

Accepted Answer

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

Question 20

Suppose Congress passes an investment tax credit that increases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

Accepted Answer

A) In the short run, unemployment will increase and inflation will fall. 
B) ​In the short run, unemployment will increase and inflation will rise. 
C) ​In the short run, unemployment will decrease and inflation will rise. 
D) ​In the short run, unemployment will decrease and inflation will fall. 
A) In the short run, unemployment will increase and inflation will fall. 
B) ​In the short run, unemployment will increase and inflation will rise. 
C) ​In the short run, unemployment will decrease and inflation will rise. 
D) ​In the short run, unemployment will decrease and inflation will fall.

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

In the long run, policy that changes aggregate demand changes

If the central bank increases the money supply, in the short run, the price level

The long-run Phillips curve would shift to the left if

The Volcker disinflation

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

If people believe that the central bank is going to reduce inflation, then

How are the effects of the financial crisis shown using the Phillips curve diagram?

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Disinflation is a reduction in

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

In the long run, which of the following would shift the long-run Phillips curve to the right?

Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

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

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

An adverse supply shock shifts the short-run Phillips curve to the left.

If policymakers increase aggregate demand, then in the short run the price level

Suppose Congress passes an investment tax credit that increases the quantity of investment goods that firms demand at any given interest rate. Which of the following would you expect to occur as a result of this change?

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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