Question 1

Assume that nominal wages increase 10% and productivity increases 20%. Using the equation for the Phillips curve, inflation is

Accepted Answer

A)  10%. 
B)  20%. 
C)  30%. 
D)  -10%. 
A)  10%. 
B)  20%. 
C)  30%. 
D)  -10%.

Question 2

(Figure: Determining Curves) The curve in the graph represents a _____ curve.

Accepted Answer

A)  demand 
B)  Phillips 
C)  labor demand 
D)  production possibilities 
A)  demand 
B)  Phillips 
C)  labor demand 
D)  production possibilities

Question 3

In a global economy, a problem with using fiscal and monetary policies to fix the problems in our country is that those policies

Accepted Answer

A)  are more likely to help other countries than to help us. 
B)  become completely ineffective. 
C)  make our trade balance deteriorate. 
D)  can lead to retaliatory actions by other nations. 
A)  are more likely to help other countries than to help us. 
B)  become completely ineffective. 
C)  make our trade balance deteriorate. 
D)  can lead to retaliatory actions by other nations.

Question 4

The contribution of the rational expectations theory to the long-run model is the understanding that

Accepted Answer

A)  economists must support the use of tax policy for long-run growth. 
B)  the response of the public to policy changes makes the economy return to long-run equilibrium more quickly. 
C)  the long-run model can rarely be applied. 
D)  the economy remains in short-run equilibrium longer. 
A)  economists must support the use of tax policy for long-run growth. 
B)  the response of the public to policy changes makes the economy return to long-run equilibrium more quickly. 
C)  the long-run model can rarely be applied. 
D)  the economy remains in short-run equilibrium longer.

Question 5

According to the equation for the Phillips curve, if nominal wages increase by 3% and productivity increases 2%, then inflation will change by

Accepted Answer

A)  -5%. 
B)  -1%. 
C)  1%. 
D)  5%. 
A)  -5%. 
B)  -1%. 
C)  1%. 
D)  5%.

Question 6

The Federal Reserve will most likely halt its quantitative easing program by

Accepted Answer

A)  increasing the money supply. 
B)  raising reserve requirements. 
C)  raising the discount rate. 
D)  selling assets from its portfolio. 
A)  increasing the money supply. 
B)  raising reserve requirements. 
C)  raising the discount rate. 
D)  selling assets from its portfolio.

Question 7

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

Accepted Answer

A)  2% 
B)  5% 
C)  8% 
D)  15% 
A)  2% 
B)  5% 
C)  8% 
D)  15%

Question 8

The possible consequences of using fiscal and monetary policies to reduce unemployment are higher debt and the risk of inflation.

Accepted Answer

A) True 
 B)False

Question 9

If policymakers attempt to reduce the rate of unemployment below its natural rate

Accepted Answer

A)  the federal deficit will rise. 
B)  interest rates will rise. 
C)  they run the risk of inflation. 
D)  worker productivity will drop. 
A)  the federal deficit will rise. 
B)  interest rates will rise. 
C)  they run the risk of inflation. 
D)  worker productivity will drop.

Question 10

Which of these helps explain jobless recoveries?

Accepted Answer

A)  U.S. productivity has been decreasing. 
B)  Firms have been unwilling to hire temporary workers until they know the demand for their product has reached prerecession levels. 
C)  Firms are not willing to pay for overtime until the demand for their product recovers. 
D)  Increased technology has enabled companies to use fewer workers. 
A)  U.S. productivity has been decreasing. 
B)  Firms have been unwilling to hire temporary workers until they know the demand for their product has reached prerecession levels. 
C)  Firms are not willing to pay for overtime until the demand for their product recovers. 
D)  Increased technology has enabled companies to use fewer workers.

Question 11

The original Phillips curve shows the relationship between the rate of change in wages and the unemployment rate. Why is the change in wages strongly correlated with inflation? What assumption does the Phillips curve relationship make about productivity?

Accepted Answer

Hence, a wage increase due to a tight la

Question 12

The graph that shows the tradeoff between inflation and money wages is called the

Accepted Answer

A)  misery index. 
B)  employment line. 
C)  Phillips curve. 
D)  minimization curve. 
A)  misery index. 
B)  employment line. 
C)  Phillips curve. 
D)  minimization curve.

Question 13

The 2007-2009 recession was caused by a(n)

Accepted Answer

A)  increase in demand following a rapid increase in the money supply. 
B)  drop in aggregate supply caused by a slowdown in productivity growth. 
C)  decrease in supply caused by an increase in oil prices. 
D)  decrease in aggregate demand triggered by a financial crisis. 
A)  increase in demand following a rapid increase in the money supply. 
B)  drop in aggregate supply caused by a slowdown in productivity growth. 
C)  decrease in supply caused by an increase in oil prices. 
D)  decrease in aggregate demand triggered by a financial crisis.

Question 14

During the period 2008-2009, _____ million people lost their jobs.

Accepted Answer

A)  3 
B)  4 
C)  7 
D)  12 
A)  3 
B)  4 
C)  7 
D)  12

Question 15

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCa?

Accepted Answer

A)  zero 
B)  3% 
C)  4% 
D)  5% 
A)  zero 
B)  3% 
C)  4% 
D)  5%

Question 16

If wages are sticky, then monetary policy actions

Accepted Answer

A)  are more effective than if wages were not sticky. 
B)  have to be announced ahead of implementation to be effective. 
C)  have to be coordinated with union labor contract negotiations. 
D)  have no impact on either prices or GDP. 
A)  are more effective than if wages were not sticky. 
B)  have to be announced ahead of implementation to be effective. 
C)  have to be coordinated with union labor contract negotiations. 
D)  have no impact on either prices or GDP.

Question 17

Monetized debt is paid for by a(n)

Accepted Answer

A)  decrease in the money supply. 
B)  increase in U.S. Treasury securities outstanding. 
C)  increase in the money supply. 
D)  decrease in world demand for U.S. Treasuries. 
A)  decrease in the money supply. 
B)  increase in U.S. Treasury securities outstanding. 
C)  increase in the money supply. 
D)  decrease in world demand for U.S. Treasuries.

Question 18

Ceteris paribus, if workers receive all their productivity increases in the form of higher wages, then wage inflation will remain stable.

Accepted Answer

A) True 
 B)False

Question 19

Use an aggregate supply-aggregate demand diagram to illustrate the Great Recession.

Accepted Answer

Assume the economy was in equilibrium at

Question 20

The natural rate of unemployment occurs when the rate of increase in the wage is greater than the increase in productivity.

Accepted Answer

A) True 
 B)False

Assume that nominal wages increase 10% and productivity increases 20%. Using the equation for the Phillips curve, inflation is

(Figure: Determining Curves) The curve in the graph represents a _____ curve.

In a global economy, a problem with using fiscal and monetary policies to fix the problems in our country is that those policies

The contribution of the rational expectations theory to the long-run model is the understanding that

According to the equation for the Phillips curve, if nominal wages increase by 3% and productivity increases 2%, then inflation will change by

The Federal Reserve will most likely halt its quantitative easing program by

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

The possible consequences of using fiscal and monetary policies to reduce unemployment are higher debt and the risk of inflation.

If policymakers attempt to reduce the rate of unemployment below its natural rate

Which of these helps explain jobless recoveries?

The original Phillips curve shows the relationship between the rate of change in wages and the unemployment rate. Why is the change in wages strongly correlated with inflation? What assumption does the Phillips curve relationship make about productivity?

The graph that shows the tradeoff between inflation and money wages is called the

The 2007-2009 recession was caused by a(n)

During the period 2008-2009, _____ million people lost their jobs.

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_a?

If wages are sticky, then monetary policy actions

Monetized debt is paid for by a(n)

Ceteris paribus, if workers receive all their productivity increases in the form of higher wages, then wage inflation will remain stable.

Use an aggregate supply-aggregate demand diagram to illustrate the Great Recession.

The natural rate of unemployment occurs when the rate of increase in the wage is greater than the increase in productivity.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

International Trade

Open Economy Macroeconomics

Filters

Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Assume that nominal wages increase 10% and productivity increases 20%. Using the equation for the Phillips curve, inflation is

(Figure: Determining Curves) The curve in the graph represents a _____ curve.

In a global economy, a problem with using fiscal and monetary policies to fix the problems in our country is that those policies

The contribution of the rational expectations theory to the long-run model is the understanding that

According to the equation for the Phillips curve, if nominal wages increase by 3% and productivity increases 2%, then inflation will change by

The Federal Reserve will most likely halt its quantitative easing program by

Using the equation for the Phillips curve, suppose that nominal wages increased by 5% and the inflation rate was 3%. What was the rate of increase in labor productivity?

The possible consequences of using fiscal and monetary policies to reduce unemployment are higher debt and the risk of inflation.

If policymakers attempt to reduce the rate of unemployment below its natural rate

Which of these helps explain jobless recoveries?

The original Phillips curve shows the relationship between the rate of change in wages and the unemployment rate. Why is the change in wages strongly correlated with inflation? What assumption does the Phillips curve relationship make about productivity?

The graph that shows the tradeoff between inflation and money wages is called the

The 2007-2009 recession was caused by a(n)

During the period 2008-2009, _____ million people lost their jobs.

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCa?

If wages are sticky, then monetary policy actions

Monetized debt is paid for by a(n)

Ceteris paribus, if workers receive all their productivity increases in the form of higher wages, then wage inflation will remain stable.

Use an aggregate supply-aggregate demand diagram to illustrate the Great Recession.

The natural rate of unemployment occurs when the rate of increase in the wage is greater than the increase in productivity.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

International Trade

Open Economy Macroeconomics

Filters

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_a?