Question 1

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A) unemployment and inflation are higher. 
B) unemployment and inflation are lower. 
C) unemployment is higher and inflation is lower. 
D) unemployment is lower and inflation is higher. 
A) unemployment and inflation are higher. 
B) unemployment and inflation are lower. 
C) unemployment is higher and inflation is lower. 
D) unemployment is lower and inflation is higher.

Question 2

What would a central bank need to do to reverse the effects of a favorable supply shock on inflation? What would its reaction do to the unemployment rate in the short run?

Accepted Answer

It would increase the money su

Question 3

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A) inflation but not the unemployment rate; this is consistent with classical theory. 
B) inflation but not the unemployment rate; this is inconsistent with classical theory. 
C) the unemployment rate but not inflation; this is consistent with classical theory. 
D) the unemployment rate but not inflation; this is inconsistent with classical theory. 
A) inflation but not the unemployment rate; this is consistent with classical theory. 
B) inflation but not the unemployment rate; this is inconsistent with classical theory. 
C) the unemployment rate but not inflation; this is consistent with classical theory. 
D) the unemployment rate but not inflation; this is inconsistent with classical theory.

Question 4

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Accepted Answer

Consider what happens when the aggregate

Question 5

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

A) downward pressures on prices and wages. 
B) downward pressures on prices and upward pressures on wages. 
C) upward pressures on prices and downward pressures on wages. 
D) upward pressures on prices and wages. 
A) downward pressures on prices and wages. 
B) downward pressures on prices and upward pressures on wages. 
C) upward pressures on prices and downward pressures on wages. 
D) upward pressures on prices and wages.

Question 6

Samuelson and Solow argued that a combination of low unemployment and low inflation

Accepted Answer

A) was impossible given the historical data as summarized by the Phillips curve. 
B) could be achieved with an "appropriate" fiscal policy. 
C) could be achieved with an "appropriate" monetary policy. 
D) could be achieved with an "appropriate" mix of monetary and fiscal policies. 
A) was impossible given the historical data as summarized by the Phillips curve. 
B) could be achieved with an "appropriate" fiscal policy. 
C) could be achieved with an "appropriate" monetary policy. 
D) could be achieved with an "appropriate" mix of monetary and fiscal policies.

Question 7

Figure 35-7
Use the two graphs in the diagram to answer the following questions.    
-Refer to Figure 35-7. Starting from C and 3, in the long run, a decrease in money supply growth moves the economy to

Accepted Answer

A) A and 1. 
B) back to C and 3. 
C) D and 4. 
D) F and 5. 
A) A and 1. 
B) back to C and 3. 
C) D and 4. 
D) F and 5.

Question 8

Which of the following results in higher inflation and higher unemployment in the short run?

Accepted Answer

A) a more expansionary monetary policy 
B) a more contractionary monetary policy 
C) a decrease in the minimum wage 
D) an adverse supply shock such as an increase in the price of oil 
A) a more expansionary monetary policy 
B) a more contractionary monetary policy 
C) a decrease in the minimum wage 
D) an adverse supply shock such as an increase in the price of oil

Question 9

In most of the 1970s, the Fed's policy created expectations of high inflation.

Accepted Answer

A) True 
 B)False

Question 10

In the long run, which of the following depends primarily on the growth rate of the money supply?

Accepted Answer

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

Question 11

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Accepted Answer

A) True 
 B)False

Question 12

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

Accepted Answer

The econom

Question 13

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A) right, so that at any inflation rate output is higher in the short run than before. 
B) left, so that at any inflation rate output is higher in the short run than before. 
C) right, so that at any inflation rate output is lower in the short run than before. 
D) left, so that at any inflation rate output is lower in the short run than before. 
A) right, so that at any inflation rate output is higher in the short run than before. 
B) left, so that at any inflation rate output is higher in the short run than before. 
C) right, so that at any inflation rate output is lower in the short run than before. 
D) left, so that at any inflation rate output is lower in the short run than before.

Question 14

Figure 35-8
Use this graph to answer the questions below.  
-Refer to figure 35-8. Suppose the economy starts at 5% unemployment and 3% inflation. If the Federal Reserve pursues an expansionary monetary policy, in the short run the economy moves to

Accepted Answer

A) 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
B) 3% unemployment and 5% inflation. In the long run the economy moves to 3% unemployment and 5% inflation. 
C) 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
D) 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. 
A) 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
B) 3% unemployment and 5% inflation. In the long run the economy moves to 3% unemployment and 5% inflation. 
C) 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
D) 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.

Question 15

Figure 35-2
Use the pair of diagrams below to answer the following questions.    
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves the economy to

Accepted Answer

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

Question 16

By about 1973, U.S. policymakers had learned that

Accepted Answer

A) Friedman and Phelps's analysis of inflation and unemployment had been correct. 
B) the short-run Phillips curve shifts when expectations of inflation change. 
C) there is no long-run trade-off between inflation and unemployment. 
D) All of the above are correct. 
A) Friedman and Phelps's analysis of inflation and unemployment had been correct. 
B) the short-run Phillips curve shifts when expectations of inflation change. 
C) there is no long-run trade-off between inflation and unemployment. 
D) All of the above are correct.

Question 17

​If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Accepted Answer

A) True 
 B)False

Question 18

Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."    
-Refer to Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2

Accepted Answer

A) results in a more favorable trade-off between inflation and unemployment. 
B) results in a more favorable trade-off between inflation and the growth rate of real GDP. 
C) represents an adverse shock to aggregate supply. 
D) represents a favorable shock to aggregate supply. 
A) results in a more favorable trade-off between inflation and unemployment. 
B) results in a more favorable trade-off between inflation and the growth rate of real GDP. 
C) represents an adverse shock to aggregate supply. 
D) represents a favorable shock to aggregate supply.

Question 19

If the Federal Reserve accommodates an adverse supply shock,

Accepted Answer

A) inflation expectations may rise which shifts the short-run Phillips curve shifts right. 
B) inflation expectations may rise which shifts the short-run Phillips curve shifts left. 
C) inflation expectations may fall which shifts the short-run Phillips curve shifts right. 
D) inflation expectations may fall which shifts the short-run Phillips curve shifts left 
A) inflation expectations may rise which shifts the short-run Phillips curve shifts right. 
B) inflation expectations may rise which shifts the short-run Phillips curve shifts left. 
C) inflation expectations may fall which shifts the short-run Phillips curve shifts right. 
D) inflation expectations may fall which shifts the short-run Phillips curve shifts left

Question 20

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

Accepted Answer

A) right. This means the unemployment rate is higher at each inflation rate. 
B) right. This means the unemployment rate is lower at each inflation rate. 
C) left. This means the unemployment rate is higher at each inflation rate. 
D) left. This means the unemployment rate is lower at each inflation rate. 
A) right. This means the unemployment rate is higher at each inflation rate. 
B) right. This means the unemployment rate is lower at each inflation rate. 
C) left. This means the unemployment rate is higher at each inflation rate. 
D) left. This means the unemployment rate is lower at each inflation rate.

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

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

What would a central bank need to do to reverse the effects of a favorable supply shock on inflation? What would its reaction do to the unemployment rate in the short run?

According to the long-run Phillips curve, in the long run monetary policy influences

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Samuelson and Solow argued that a combination of low unemployment and low inflation

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the long run, a decrease in money supply growth moves the economy to

Which of the following results in higher inflation and higher unemployment in the short run?

In most of the 1970s, the Fed's policy created expectations of high inflation.

In the long run, which of the following depends primarily on the growth rate of the money supply?

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

If inflation expectations rise, the short-run Phillips curve shifts

Figure 35-8 Use this graph to answer the questions below. -Refer to figure 35-8. Suppose the economy starts at 5% unemployment and 3% inflation. If the Federal Reserve pursues an expansionary monetary policy, in the short run the economy moves to

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves the economy to

By about 1973, U.S. policymakers had learned that

​If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2

If the Federal Reserve accommodates an adverse supply shock,

An adverse supply shock shifts the short-run Phillips curve to 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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If expected inflation increases, the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 35-9. The shift of the aggregate-supply curve from AS₁ to AS₂