Question 1

A decrease in expected inflation shifts

Accepted Answer

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

Question 2

Any policy change that reduced the natural rate of unemployment would

Accepted Answer

A) shift the long-run Phillips curve to the left. 
B) shift the long-run aggregate-supply curve to the right. 
C) improve the functioning of the labor market. 
D) All of the above are correct. 
A) shift the long-run Phillips curve to the left. 
B) shift the long-run aggregate-supply curve to the right. 
C) improve the functioning of the labor market. 
D) All of the above are correct.

Question 3

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would reduce the natural rate of unemployment?

Accepted Answer

A) both an increase in the rate of money growth and increased unemployment compensation 
B) an increase in the rate of money growth but not increased unemployment compensation 
C) an increase in unemployment compensation but not an increase in the rate of money growth. 
D) neither an increase in unemployment compensation nor an increase in the rate of money growth. 
A) both an increase in the rate of money growth and increased unemployment compensation 
B) an increase in the rate of money growth but not increased unemployment compensation 
C) an increase in unemployment compensation but not an increase in the rate of money growth. 
D) neither an increase in unemployment compensation nor an increase in the rate of money growth.

Question 5

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Accepted Answer

A) Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation). 
B) Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation). 
C) Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation). 
D) Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment). 
A) Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation). 
B) Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation). 
C) Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation). 
D) Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment).

Question 6

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Accepted Answer

A) established a lot of credibility in its commitment to keep inflation at about 2 percent. 
B) established a lot of credibility in its commitment to keep inflation at about 5 percent. 
C) failed to establish significant credibility in its announced intent to keep inflation at about 2 percent. 
D) failed to establish significant credibility in its announced intent to keep inflation at about 5 percent. 
A) established a lot of credibility in its commitment to keep inflation at about 2 percent. 
B) established a lot of credibility in its commitment to keep inflation at about 5 percent. 
C) failed to establish significant credibility in its announced intent to keep inflation at about 2 percent. 
D) failed to establish significant credibility in its announced intent to keep inflation at about 5 percent.

Question 7

Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

Accepted Answer

A) aggregate demand to the right. 
B) aggregate demand to the left. 
C) aggregate supply to the right. 
D) aggregate supply to the left. 
A) aggregate demand to the right. 
B) aggregate demand to the left. 
C) aggregate supply to the right. 
D) aggregate supply to the left.

Question 8

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Accepted Answer

A) 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 short-run nor the long-run Phillips curves 
A) 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 short-run nor the long-run Phillips curves

Question 9

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 10

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

Accepted Answer

The short-run Phillips curve s

Question 11

In the long run, inflation

Accepted Answer

A) and unemployment are primarily determined by labor market factors. 
B) and unemployment are primarily determined by the rate of money supply growth. 
C) is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors. 
D) is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth. 
A) and unemployment are primarily determined by labor market factors. 
B) and unemployment are primarily determined by the rate of money supply growth. 
C) is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors. 
D) is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.

Question 12

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie

Question 13

A favorable supply shock will cause

Accepted Answer

A) unemployment to rise and the short-run Phillips curve to shift right. 
B) unemployment to rise and the short-run Phillips curve to shift left. 
C) unemployment to fall and the short-run Phillips curve to shift right. 
D) unemployment to fall and the short-run Phillips curve to shift left. 
A) unemployment to rise and the short-run Phillips curve to shift right. 
B) unemployment to rise and the short-run Phillips curve to shift left. 
C) unemployment to fall and the short-run Phillips curve to shift right. 
D) unemployment to fall and the short-run Phillips curve to shift left.

Question 14

The very low inflation that the U.S. experienced in 2009 and 2010

Accepted Answer

A) appears to have reduced expected inflation, and the short-run Phillips curve shifted downward as a result. 
B) appears to have reduced expected inflation, and the short-run Phillips curve shifted upward as a result. 
C) does not appear to have reduced expected inflation, and the short-run Phillips curve remained relatively stable as a result. 
D) does not appear to have reduced expected inflation, but the short-run Phillips curve shifted dramatically nevertheless. 
A) appears to have reduced expected inflation, and the short-run Phillips curve shifted downward as a result. 
B) appears to have reduced expected inflation, and the short-run Phillips curve shifted upward as a result. 
C) does not appear to have reduced expected inflation, and the short-run Phillips curve remained relatively stable as a result. 
D) does not appear to have reduced expected inflation, but the short-run Phillips curve shifted dramatically nevertheless.

Question 15

Figure 35-6
Use the graph below to answer the following questions.  
-Refer to Figure 35-6. Curve 1 is the

Accepted Answer

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

Question 16

Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that

Accepted Answer

A) the rational expectations hypothesis is false. 
B) the rational expectations hypothesis is true. 
C) the policymakers lacked credibility. 
D) None of the above is certain. 
A) the rational expectations hypothesis is false. 
B) the rational expectations hypothesis is true. 
C) the policymakers lacked credibility. 
D) None of the above is certain.

Question 17

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Accepted Answer

A) It would shift the long-run Phillips curve right. 
B) It would shift the long-run Phillips curve left. 
C) There would be an upward movement along a given long-run Phillips curve. 
D) There would be a downward movement along a given long-run Philips curve. 
A) It would shift the long-run Phillips curve right. 
B) It would shift the long-run Phillips curve left. 
C) There would be an upward movement along a given long-run Phillips curve. 
D) There would be a downward movement along a given long-run Philips curve.

Question 18

A. W. Phillips' findings were based on data

Accepted Answer

A) from 1861-1957 for the United Kingdom. 
B) from 1861-1957 for the United States. 
C) mostly from the post-World War II period in the United Kingdom. 
D) mostly from the post-World War II period in the United States. 
A) from 1861-1957 for the United Kingdom. 
B) from 1861-1957 for the United States. 
C) mostly from the post-World War II period in the United Kingdom. 
D) mostly from the post-World War II period in the United States.

Question 19

A favorable supply shock causes the price level to

Accepted Answer

A) rise. To counter this a central bank would increase the money supply. 
B) rise. To counter this a central bank would decrease the money supply. 
C) fall. To counter this a central bank would increase the money supply. 
D) fall. To counter this a central bank would decrease the money supply. 
A) rise. To counter this a central bank would increase the money supply. 
B) rise. To counter this a central bank would decrease the money supply. 
C) fall. To counter this a central bank would increase the money supply. 
D) fall. To counter this a central bank would decrease the money supply.

Question 20

The misery index is supposed to measure the

Accepted Answer

A) social cost of unemployment. 
B) health of the economy. 
C) lost output associated with a particular unemployment rate. 
D) short-run tradeoff between inflation and unemployment. 
A) social cost of unemployment. 
B) health of the economy. 
C) lost output associated with a particular unemployment rate. 
D) short-run tradeoff between inflation and unemployment.

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

A decrease in expected inflation shifts

Any policy change that reduced the natural rate of unemployment would

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Which of the following would reduce the natural rate of unemployment?

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

A central bank can reduce inflation by reducing money supply growth, but it necessarily does so at the cost of permanently raising the unemployment rate.

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?

In the long run, inflation

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

A favorable supply shock will cause

The very low inflation that the U.S. experienced in 2009 and 2010

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. Curve 1 is the

Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

A. W. Phillips' findings were based on data

A favorable supply shock causes the price level to

The misery index is supposed to measure the

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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