Question 1

The original Phillips curve suggests a(n) __________ relationship between the rate of change in __________ and the __________.

Accepted Answer

A) direct; prices; unemployment rate 
B) inverse; money wage rates; unemployment rate 
C) inverse; prices; unemployment 
D) direct; money wage rates; money supply 
E) inverse; money wage rates; money supply 
A) direct; prices; unemployment rate 
B) inverse; money wage rates; unemployment rate 
C) inverse; prices; unemployment 
D) direct; money wage rates; money supply 
E) inverse; money wage rates; money supply

Question 2

The real business cycle theory focuses on the impact that changes in long-run aggregate supply will have on the business cycle.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 16-9
  
-Refer to Exhibit 16-9. Assume that the starting point is point 1. Suppose that the government implements expansionary fiscal policy that raises aggregate demand. Which of the following best goes with the diagram shown?

Accepted Answer

A) New classical theory with policy incorrectly anticipated, bias downward 
B) New classical theory with policy incorrectly anticipated, bias upward 
C) Real business cycle theory 
D) New classical theory with policy unanticipated 
E) Policy ineffectiveness proposition (PIP) 
A) New classical theory with policy incorrectly anticipated, bias downward 
B) New classical theory with policy incorrectly anticipated, bias upward 
C) Real business cycle theory 
D) New classical theory with policy unanticipated 
E) Policy ineffectiveness proposition (PIP)

Question 4

The short-run Phillips curve holds that

Accepted Answer

A) high inflation and high unemployment can occur together. 
B) low inflation and low unemployment can occur together. 
C) high inflation and low unemployment can occur together. 
D) b and c 
A) high inflation and high unemployment can occur together. 
B) low inflation and low unemployment can occur together. 
C) high inflation and low unemployment can occur together. 
D) b and c

Question 5

Stagflation implies that

Accepted Answer

A) a tradeoff between inflation and unemployment may not always exist. 
B) policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation. 
C) the short-run Phillips curve is stable. 
D) the short-run Phillips curve is vertical. 
A) a tradeoff between inflation and unemployment may not always exist. 
B) policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation. 
C) the short-run Phillips curve is stable. 
D) the short-run Phillips curve is vertical.

Question 6

According to the new classical theory, if the public correctly anticipates a government policy to increase aggregate demand, then

Accepted Answer

A) there will be a short-run tradeoff between inflation and unemployment, but there will not be a long-run tradeoff. 
B) there will be a long-run tradeoff between inflation and unemployment, but there will not be a short-run tradeoff. 
C) there will be both a long-run and a short-run tradeoff between inflation and unemployment. 
D) there will be neither a long-run nor a short-run tradeoff between inflation and unemployment. 
E) there may be a short-run tradeoff between inflation and unemployment, but one cannot say for certain whether there will be a long-run tradeoff. 
A) there will be a short-run tradeoff between inflation and unemployment, but there will not be a long-run tradeoff. 
B) there will be a long-run tradeoff between inflation and unemployment, but there will not be a short-run tradeoff. 
C) there will be both a long-run and a short-run tradeoff between inflation and unemployment. 
D) there will be neither a long-run nor a short-run tradeoff between inflation and unemployment. 
E) there may be a short-run tradeoff between inflation and unemployment, but one cannot say for certain whether there will be a long-run tradeoff.

Question 7

The economist who, in his presidential address to the American Economic Association in 1967, attacked the idea of a permanent downward-sloping Phillips curve was

Accepted Answer

A) A.W.Phillips. 
B) Paul Samuelson. 
C) Milton Friedman. 
D) Robert Lucas. 
E) Thomas Sargent. 
A) A.W.Phillips. 
B) Paul Samuelson. 
C) Milton Friedman. 
D) Robert Lucas. 
E) Thomas Sargent.

Question 8

The Samuelson-Solow version of the Phillips curve states that

Accepted Answer

A) there is an inverse relationship between the wage inflation rateand unemployment. 
B) there is a direct relationship between the wage inflation rateand unemployment. 
C) there is an inverse relationship between price inflation and unemployment. 
D) there is a direct relationship between price inflation and unemployment. 
E) a and b 
A) there is an inverse relationship between the wage inflation rateand unemployment. 
B) there is a direct relationship between the wage inflation rateand unemployment. 
C) there is an inverse relationship between price inflation and unemployment. 
D) there is a direct relationship between price inflation and unemployment. 
E) a and b

Question 9

The economy is in long-run equilibrium when there is an incorrectly anticipated increase in aggregate demand brought about by expansionary monetary policy. Specifically, aggregate demand increases by less than people anticipate (bias upward). According to new classical theory, the price level will __________ and Real GDP will __________ in the short run. In the long run, the price level will be __________ than it was before aggregate demand increased.

Accepted Answer

A) rise; rise; lower 
B) rise; higher; fall 
C) rise; fall; higher 
D) fall; rise; lower 
E) rise; rise; higher 
A) rise; rise; lower 
B) rise; higher; fall 
C) rise; fall; higher 
D) fall; rise; lower 
E) rise; rise; higher

Question 10

The original Phillips curve depicted an inverse relationship between wage inflation and unemployment.

Accepted Answer

A) True 
 B)False

Exam 16: Expectations Theory and the Economy

The original Phillips curve suggests a(n) __________ relationship between the rate of change in __________ and the __________.

The real business cycle theory focuses on the impact that changes in long-run aggregate supply will have on the business cycle.

Exhibit 16-9 -Refer to Exhibit 16-9. Assume that the starting point is point 1. Suppose that the government implements expansionary fiscal policy that raises aggregate demand. Which of the following best goes with the diagram shown?

The short-run Phillips curve holds that

Stagflation implies that

According to the new classical theory, if the public correctly anticipates a government policy to increase aggregate demand, then

The economist who, in his presidential address to the American Economic Association in 1967, attacked the idea of a permanent downward-sloping Phillips curve was

The Samuelson-Solow version of the Phillips curve states that

The original Phillips curve depicted an inverse relationship between wage inflation and unemployment.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

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Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

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Filters

The original Phillips curve suggests a(n) relationship between the rate of change in and the __.