Question 1

An improved functioning of the labor markets will shift

Accepted Answer

A) both the long-run Phillips curve and the long-run aggregate supply curve to the right. 
B) both the long-run Phillips curve and the long-run aggregate supply curve to the left. 
C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. 
D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right. 
A) both the long-run Phillips curve and the long-run aggregate supply curve to the right. 
B) both the long-run Phillips curve and the long-run aggregate supply curve to the left. 
C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. 
D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right. D

Question 2

How does a central bank's accommodation of an adverse supply shock change the long-run results of the shock?

Accepted Answer

If a central bank accommodates an adverse supply shock by increasing the growth rate of the money supply, then inflation is higher in the long run. The increased growth rate of the money supply increases inflation and eventually increases expected inflation. The increase in expected inflation shifts the short-run Phillips curve to the right. If the central bank does nothing, then the short-run Phillips curve shifts back to its original position when the shock ends.

Question 3

According to the Phillips curve, which fiscal policies can be used to reduce unemployment in the short run?

Accepted Answer

An increase in government expenditures or a decrease in taxes.

Question 4

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Accepted Answer

The answer of A central bank disinflates. Output falls by...

Question 5

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A downward-sloping Phillips curve implie

Question 7

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate. How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

Accepted Answer

If unemployment is above its natural rat

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Accepted Answer

A) decreased the money supply. 
B) increased government expenditures. 
C) decreased taxes. 
D) increased the money supply. 
A) decreased the money supply. 
B) increased government expenditures. 
C) decreased taxes. 
D) increased the money supply.

Question 10

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Accepted Answer

A) Both the price level and output 
B) The price level but not output 
C) Output but not the price level 
D) Neither output nor the price level 
A) Both the price level and output 
B) The price level but not output 
C) Output but not the price level 
D) Neither output nor the price level

Question 11

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 12

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 15

Other things constant, which of the following would reduce unemployment and raise inflation?

Accepted Answer

A) The government lowers government spending. 
B) Because of low growth abroad, net exports falls. 
C) The government raises taxes. 
D) Businesses become more optimistic about the future of the economy. 
A) The government lowers government spending. 
B) Because of low growth abroad, net exports falls. 
C) The government raises taxes. 
D) Businesses become more optimistic about the future of the economy.

Question 16

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 17

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Accepted Answer

A) both inflation and the unemployment rate are higher than they were prior to the change in policy. 
B) inflation is higher and the unemployment rate is the same as it was prior to the change in policy. 
C) inflation is lower and the unemployment rate is lower than it was prior to the change in policy. 
D) inflation is lower and unemployment is the same as it was prior to the change in policy. 
A) both inflation and the unemployment rate are higher than they were prior to the change in policy. 
B) inflation is higher and the unemployment rate is the same as it was prior to the change in policy. 
C) inflation is lower and the unemployment rate is lower than it was prior to the change in policy. 
D) inflation is lower and unemployment is the same as it was prior to the change in policy.

Question 18

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

Accepted Answer

A) True 
 B)False

Question 19

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Accepted Answer

The answer of A central bank pledges to reduce the...

Question 20

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.

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

An improved functioning of the labor markets will shift

How does a central bank's accommodation of an adverse supply shock change the long-run results of the shock?

According to the Phillips curve, which fiscal policies can be used to reduce unemployment in the short run?

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

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

Suppose that the economy is at an inflation rate such that unemployment is above the natural rate. How does the economy return to the natural rate of unemployment if this lower inflation rate persists? Use sticky-wage theory to explain your answer.

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

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

In the long run, policy that changes aggregate demand changes

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural 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?

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Other things constant, which of the following would reduce unemployment and raise inflation?

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

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation expectations to 5%, but the central bank reduces inflation to 3%. What happens to the unemployment rate?

Which of the following describes the Volcker disinflation most accurately?

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 Nations 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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