Question 1

Based on the sticky-price model, the short-run aggregate supply curve will be steeper the greater the:

Accepted Answer

A) target nominal-wage rate. 
B) target real-wage rate. 
C) proportion of firms with flexible prices. 
D) proportion of firms with sticky prices. 
A) target nominal-wage rate. 
B) target real-wage rate. 
C) proportion of firms with flexible prices. 
D) proportion of firms with sticky prices.

Question 2

How is demand-pull inflation different from cost-push inflation?

Accepted Answer

Demand-pull inflation is caused by the i

Question 3

The assumption of adaptive expectations for inflation means that people will form their expectations of inflation by:

Accepted Answer

A) taking all information into account using the best economic model available. 
B) asking the opinions of experts. 
C) basing their opinions on recently observed inflation. 
D) flipping a coin. 
A) taking all information into account using the best economic model available. 
B) asking the opinions of experts. 
C) basing their opinions on recently observed inflation. 
D) flipping a coin.

Question 4

Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

Accepted Answer

A) greater than the expected price level. 
B) less than the expected price level. 
C) equal to the natural price level. 
D) stuck at the existing price level. 
A) greater than the expected price level. 
B) less than the expected price level. 
C) equal to the natural price level. 
D) stuck at the existing price level.

Question 5

The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:

Accepted Answer

A) Okun's law. 
B) the Phillips curve. 
C) the natural-rate hypothesis. 
D) hysteresis. 
A) Okun's law. 
B) the Phillips curve. 
C) the natural-rate hypothesis. 
D) hysteresis.

Question 6

In the context of the sticky-price model, the higher the average rate of inflation, the more frequently firms must adjust their prices, which implies that a high rate of inflation:

Accepted Answer

A) has no effect on the slope of the short-run aggregate supply curve. 
B) should make the short-run aggregate supply curve flatter. 
C) makes the short-run aggregate supply curve steeper. 
D) causes prices to be sticky. 
A) has no effect on the slope of the short-run aggregate supply curve. 
B) should make the short-run aggregate supply curve flatter. 
C) makes the short-run aggregate supply curve steeper. 
D) causes prices to be sticky.

Question 7

If the short-run aggregate supply curve is steep, the Phillips curve will be:

Accepted Answer

A) flat. 
B) steep. 
C) backward bending. 
D) unrelated to the slope of the short-run aggregate supply curve. 
A) flat. 
B) steep. 
C) backward bending. 
D) unrelated to the slope of the short-run aggregate supply curve.

Question 8

Exhibit: AD-AS Shifts   Starting from long-run equilibrium at A with output equal to   and the price level equal to P1, if there is an unexpected monetary contraction that shifts aggregate demand from AD1 to AD3, then the long-run neutrality of money is represented by the movement from:

Accepted Answer

A) A to B 
B) A to G 
C) A to C 
D) A to D 
A) A to B 
B) A to G 
C) A to C 
D) A to D

Question 9

Assume that an economy is governed by the Phillips curve π = πe - 0.5 (u - 0.06), where π = (P - P-1) / P-1, πe = π-1, and 0.06 is the natural rate of unemployment. Suppose that, in period zero, π = 0.03 and πe = 0.03-that is, that the economy is experiencing steady inflation at a 3-percent rate.
a.Now assume that the government decides to impose whatever demand is necessary to cut unemployment to 0.04. Suppose the government follows this policy for periods 1 through 5. Create a table of π and πe for these five periods.
b.Assume that, for periods 6 through 10, the government decides to hold unemployment at 0.06. Create another table of π andπe for these five periods. Is there any reason to expect the inflation rate to go back to 0.03?
c.If the government persisted in its behaviour under part a, do you think the public would continue for long forming expectations according to πe = π-1? Why?

Accepted Answer

a. @#IMG-DLM&
b. @#IMG-DLM&
​There is no reason to

Question 10

According to the Phillips curve, other things being equal, inflation depends positively on:

Accepted Answer

A) expected inflation. 
B) the unemployment rate. 
C) the rate of technological change. 
D) the quantities of capital and labour. 
A) expected inflation. 
B) the unemployment rate. 
C) the rate of technological change. 
D) the quantities of capital and labour.

Question 11

After examining international data, the economist Robert Lucas found that aggregate demand has the biggest effect on output in countries where aggregate demand:

Accepted Answer

A) and prices are most stable. 
B) and prices are most variable. 
C) is most stable but prices are most variable. 
D) is most variable but prices are most stable. 
A) and prices are most stable. 
B) and prices are most variable. 
C) is most stable but prices are most variable. 
D) is most variable but prices are most stable.

Question 12

Along a short-run aggregate supply curve, output is related to unexpected movements in the _____. Along a Phillips curve, unemployment is related to unexpected movements in the _____.

Accepted Answer

A) price level; inflation rate 
B) inflation rate; price level 
C) unemployment rate; price level 
D) price level; level of output 
A) price level; inflation rate 
B) inflation rate; price level 
C) unemployment rate; price level 
D) price level; level of output

Question 13

If the short-run aggregate supply curve is assumed to be horizontal and there are no international capital flows, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?

Accepted Answer

A) classical closed economy 
B) aggregate demand and aggregate supply 
C) IS-LM model 
D) Mundell-Fleming model with floating exchange rate 
A) classical closed economy 
B) aggregate demand and aggregate supply 
C) IS-LM model 
D) Mundell-Fleming model with floating exchange rate

Question 14

Assume that people form expectations rationally and that the sticky-price model describes the aggregate supply curve in the economy. For each of the following scenarios explain whether or not monetary policy can have real effects on the economy.
a.The central bank determines monetary policy using the same information available to all firms and at the same time firms are setting prices, so that both firms and policymakers have all of the same information.
b.The central bank determines monetary policy after firms have set prices using information not available at the time prices were set.

Accepted Answer

a.The aggregate supply curve implies tha

Question 15

The imperfect-information model assumes that producers find it difficult to distinguish between changes in:

Accepted Answer

A) real wages and nominal wages. 
B) the overall level of prices and relative prices. 
C) the overall level of prices and the expected level of prices. 
D) cost-push inflation and demand-pull inflation. 
A) real wages and nominal wages. 
B) the overall level of prices and relative prices. 
C) the overall level of prices and the expected level of prices. 
D) cost-push inflation and demand-pull inflation.

Question 16

If only unanticipated changes in the money supply affect real GDP, the public has rational expectations, and everyone has the same information about the state of the economy, then:

Accepted Answer

A) monetary policy can be used to systematically stabilize output. 
B) monetary policy cannot be used to systematically stabilize output. 
C) a policy of keeping the money supply constant is optimal. 
D) a policy of adjusting the money supply in response to the state of the economy is optimal. 
A) monetary policy can be used to systematically stabilize output. 
B) monetary policy cannot be used to systematically stabilize output. 
C) a policy of keeping the money supply constant is optimal. 
D) a policy of adjusting the money supply in response to the state of the economy is optimal.

Question 17

The short-run aggregate supply curve is drawn for a given:

Accepted Answer

A) output level. 
B) price level. 
C) expected price level. 
D) level of aggregate demand. 
A) output level. 
B) price level. 
C) expected price level. 
D) level of aggregate demand.

Question 18

Assume that an economy has the Phillips curve π = π-1 - 0.5 (u - 0.06). How many percentage-point-years of cyclical unemployment are needed to reduce inflation by 5 percentage points?

Accepted Answer

A) 20 
B) 10 
C) 5 
D) 2.5 
A) 20 
B) 10 
C) 5 
D) 2.5

Question 19

According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:

Accepted Answer

A) increases production. 
B) does not change production. 
C) decreases production. 
D) hires more workers. 
A) increases production. 
B) does not change production. 
C) decreases production. 
D) hires more workers.

Question 20

In the short run, if the price level is greater than the expected price level, then in the long run the aggregate:

Accepted Answer

A) demand curve will shift leftward. 
B) demand curve will shift rightward. 
C) supply curve will shift upward. 
D) supply curve will shift downward. 
A) demand curve will shift leftward. 
B) demand curve will shift rightward. 
C) supply curve will shift upward. 
D) supply curve will shift downward.

Based on the sticky-price model, the short-run aggregate supply curve will be steeper the greater the:

How is demand-pull inflation different from cost-push inflation?

The assumption of adaptive expectations for inflation means that people will form their expectations of inflation by:

Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:

In the context of the sticky-price model, the higher the average rate of inflation, the more frequently firms must adjust their prices, which implies that a high rate of inflation:

If the short-run aggregate supply curve is steep, the Phillips curve will be:

Exhibit: AD-AS Shifts Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, if there is an unexpected monetary contraction that shifts aggregate demand from AD₁ to AD₃, then the long-run neutrality of money is represented by the movement from:

According to the Phillips curve, other things being equal, inflation depends positively on:

After examining international data, the economist Robert Lucas found that aggregate demand has the biggest effect on output in countries where aggregate demand:

Along a short-run aggregate supply curve, output is related to unexpected movements in the _. Along a Phillips curve, unemployment is related to unexpected movements in the _.

If the short-run aggregate supply curve is assumed to be horizontal and there are no international capital flows, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?

The imperfect-information model assumes that producers find it difficult to distinguish between changes in:

If only unanticipated changes in the money supply affect real GDP, the public has rational expectations, and everyone has the same information about the state of the economy, then:

The short-run aggregate supply curve is drawn for a given:

Assume that an economy has the Phillips curve π = π_-1 - 0.5 (u - 0.06). How many percentage-point-years of cyclical unemployment are needed to reduce inflation by 5 percentage points?

According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:

In the short run, if the price level is greater than the expected price level, then in the long run the aggregate:

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

Aggregate Demand Ii: Applying the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exam 14: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Based on the sticky-price model, the short-run aggregate supply curve will be steeper the greater the:

How is demand-pull inflation different from cost-push inflation?

The assumption of adaptive expectations for inflation means that people will form their expectations of inflation by:

Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:

The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:

In the context of the sticky-price model, the higher the average rate of inflation, the more frequently firms must adjust their prices, which implies that a high rate of inflation:

If the short-run aggregate supply curve is steep, the Phillips curve will be:

Exhibit: AD-AS Shifts Starting from long-run equilibrium at A with output equal to and the price level equal to P1, if there is an unexpected monetary contraction that shifts aggregate demand from AD1 to AD3, then the long-run neutrality of money is represented by the movement from:

According to the Phillips curve, other things being equal, inflation depends positively on:

After examining international data, the economist Robert Lucas found that aggregate demand has the biggest effect on output in countries where aggregate demand:

Along a short-run aggregate supply curve, output is related to unexpected movements in the _____. Along a Phillips curve, unemployment is related to unexpected movements in the _____.

If the short-run aggregate supply curve is assumed to be horizontal and there are no international capital flows, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?

The imperfect-information model assumes that producers find it difficult to distinguish between changes in:

If only unanticipated changes in the money supply affect real GDP, the public has rational expectations, and everyone has the same information about the state of the economy, then:

The short-run aggregate supply curve is drawn for a given:

Assume that an economy has the Phillips curve π = π-1 - 0.5 (u - 0.06). How many percentage-point-years of cyclical unemployment are needed to reduce inflation by 5 percentage points?

According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:

In the short run, if the price level is greater than the expected price level, then in the long run the aggregate:

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

Aggregate Demand Ii: Applying the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exhibit: AD-AS Shifts Starting from long-run equilibrium at A with output equal to and the price level equal to P₁, if there is an unexpected monetary contraction that shifts aggregate demand from AD₁ to AD₃, then the long-run neutrality of money is represented by the movement from:

Along a short-run aggregate supply curve, output is related to unexpected movements in the _. Along a Phillips curve, unemployment is related to unexpected movements in the _.

Assume that an economy has the Phillips curve π = π_-1 - 0.5 (u - 0.06). How many percentage-point-years of cyclical unemployment are needed to reduce inflation by 5 percentage points?