Question 1

The essential feature of a stagflation phase is

Accepted Answer

A) a shift in the short run aggregate supply curve to the right. 
B) changes in expectations about the price level. 
C) falling unemployment and rising inflation. 
D) a shift of the LRAS curve to the right. 
A) a shift in the short run aggregate supply curve to the right. 
B) changes in expectations about the price level. 
C) falling unemployment and rising inflation. 
D) a shift of the LRAS curve to the right. B

Question 2

Suppose an economy is operating with an inflationary gap.In this case, policymakers would
Seek to move the economy

Accepted Answer

A) back down the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
B) up the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
C) back down the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
D) up the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
A) back down the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
B) up the Phillips curve, trading a reduction in unemployment for an increase in inflation. 
C) back down the Phillips curve, trading a reduction in inflation for an increase in unemployment. 
D) up the Phillips curve, trading a reduction in inflation for an increase in unemployment. C

Question 3

A Phillips phase of the inflation-unemployment relationship occurs when both inflation and
unemployment increase.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP)
In the long run?

Accepted Answer

A) If %∆M > %∆ YP , then %∆P > %∆M. B) If %∆M > %∆ YP , then %∆P > %∆ YP. C) If %∆M = %∆ YP , then %∆P = 0. D) If %∆M = %∆ YP , then %∆P < 0. A) If %∆M > %∆ YP , then %∆P > %∆M. B) If %∆M > %∆ YP , then %∆P > %∆ YP. C) If %∆M = %∆ YP , then %∆P = 0. D) If %∆M = %∆ YP , then %∆P < 0.

Question 5

Use the following to answer questions 
Exhibit: The Inflation-Unemployment Cycle  
-(Exhibit: The Inflation-Unemployment Cycle)
Expansionary policy to counter a recessionary gap would move the economy from point:

Accepted Answer

A) 1 to 2. 
B) 3 to 2. 
C) 3 to 4. 
D) 4 to 3. 
A) 1 to 2. 
B) 3 to 2. 
C) 3 to 4. 
D) 4 to 3.

Question 6

Consider the following statement: "President X expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course.'" Which of the following could have caused this phenomenon?

Accepted Answer

A) Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. 
B) Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right. 
C) Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right. 
D) Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right. 
A) Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. 
B) Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right. 
C) Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right. 
D) Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Question 7

Frictional unemployment exists because

Accepted Answer

A) the quantity demanded of labor exceeds the quantity supplied at the equilibrium wage rate. 
B) of fluctuations in economic activity. 
C) technological changes make the skills of the workers incompatible with the skills used on the job. 
D) it takes time for people seeking jobs and employers seeking workers to find each other. 
A) the quantity demanded of labor exceeds the quantity supplied at the equilibrium wage rate. 
B) of fluctuations in economic activity. 
C) technological changes make the skills of the workers incompatible with the skills used on the job. 
D) it takes time for people seeking jobs and employers seeking workers to find each other.

Question 8

The notion that there is a tradeoff between inflation and unemployment is expressed as an
efficiency wage curve.

Accepted Answer

A) True 
 B)False

Question 9

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy
Was still in a recessionary gap left over from the 1990-1991 recession.Which of the
Following best explains this move?

Accepted Answer

A) The Fed was concerned that the budget deficit would increase. 
B) The Fed had failed to take into account the lag in monetary policy. 
C) The Fed was taking explicit account of the lag in monetary policy. 
D) The Fed wanted to avert a potential housing market crisis. 
A) The Fed was concerned that the budget deficit would increase. 
B) The Fed had failed to take into account the lag in monetary policy. 
C) The Fed was taking explicit account of the lag in monetary policy. 
D) The Fed wanted to avert a potential housing market crisis.

Question 10

What is a reservation wage?

Accepted Answer

A) It is the highest wage that an unemployed worker would accept, if it were offered. 
B) It is the lowest wage that an unemployed worker would accept, if it were offered. 
C) It is the highest wage that an employer will offer a potential worker if there are many candidates vying for the job. 
D) It is the lowest wage that an unemployed worker would accept, excluding any non-pecuniary benefits. 
A) It is the highest wage that an unemployed worker would accept, if it were offered. 
B) It is the lowest wage that an unemployed worker would accept, if it were offered. 
C) It is the highest wage that an employer will offer a potential worker if there are many candidates vying for the job. 
D) It is the lowest wage that an unemployed worker would accept, excluding any non-pecuniary benefits.

Question 11

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to
This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Accepted Answer

A) excessive bank lending. 
B) potential crises in financial markets. 
C) inflation. 
D) excess aggregate demand. 
A) excessive bank lending. 
B) potential crises in financial markets. 
C) inflation. 
D) excess aggregate demand.

Question 12

Use the following to answer questions 
Exhibit: AD-AS and the Inflation-Unemployment Cycle  
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle)
Suppose initially the economy was at point 1 and as a result of
Stabilization policies, it is now at point 3.Consequently, there will be pressure for

Accepted Answer

A) workers to settle for lower nominal wages. 
B) firms to decrease prices. 
C) workers and firms to incorporate price increases into their expectations. 
D) the Fed to buy bonds in the open market. 
A) workers to settle for lower nominal wages. 
B) firms to decrease prices. 
C) workers and firms to incorporate price increases into their expectations. 
D) the Fed to buy bonds in the open market.

Question 13

Falling inflation means

Accepted Answer

A) that the price level is falling from one period to the next. 
B) that the price level is falling at a decreasing rate. 
C) that the price level is falling at an increasing rate. 
D) that the price level is increasing at a decreasing rate. 
A) that the price level is falling from one period to the next. 
B) that the price level is falling at a decreasing rate. 
C) that the price level is falling at an increasing rate. 
D) that the price level is increasing at a decreasing rate.

Question 14

Use the following to answer questions 
Exhibit: Shifts in Aggregate Demand and Aggregate Supply and Inflation-Unemployment Phases  
-(Exhibit: Shifts in Aggregate Demand and Aggregate Supply and Inflation-Unemployment Phases)
The movement from point 4 to point 5 is consistent with which inflation-unemployment phase?

Accepted Answer

A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment has fallen 
C) growth phase because the economy is producing above its potential output 
D) recovery phase because inflation and unemployment have fallen 
A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment has fallen 
C) growth phase because the economy is producing above its potential output 
D) recovery phase because inflation and unemployment have fallen

Question 15

Which of the following affect the values of inflation and unemployment?
I.changes in government spending II.expectations about the price level
III.changes in nominal wages IV.changes in money supply

Accepted Answer

A) I and IV only 
B) I, II, and IV only 
C) II and III only 
D) I, II, III, and IV 
A) I and IV only 
B) I, II, and IV only 
C) II and III only 
D) I, II, III, and IV

Question 16

Along an actual (observed)
Phillips curve,

Accepted Answer

A) aggregate output varies inversely with the unemployment rate. 
B) aggregate output directly inversely with the inflation rate. 
C) the inflation rate varies inversely with the unemployment rate. 
D) the inflation rate varies directly with the unemployment rate. 
A) aggregate output varies inversely with the unemployment rate. 
B) aggregate output directly inversely with the inflation rate. 
C) the inflation rate varies inversely with the unemployment rate. 
D) the inflation rate varies directly with the unemployment rate.

Question 17

Use the following to answer questions 
Exhibit: AD-AS and the Inflation-Unemployment Cycle  
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle)
The movement from point 3 to point 4 is consistent with which phase
Of the inflation-unemployment relationship?

Accepted Answer

A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment is closer to its natural rate 
C) stagflation phase because inflation and unemployment have risen 
D) recovery phase because the inflationary gap has been eliminated 
A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment is closer to its natural rate 
C) stagflation phase because inflation and unemployment have risen 
D) recovery phase because the inflationary gap has been eliminated

Question 18

Consider the following statement: "President X expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Identify the stage of the inflation-unemployment phase.

Accepted Answer

A) the stagflation phase 
B) the recovery phase 
C) the Phillips phase 
D) the growth phase 
A) the stagflation phase 
B) the recovery phase 
C) the Phillips phase 
D) the growth phase

Question 19

Suppose an economy is operating with a recessionary gap.In this case, policymakers would seek to move the economy

Accepted Answer

A) back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
B) up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
C) back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
D) up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
A) back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
B) up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment. 
C) back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment. 
D) up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.

Question 20

Use the following to answer questions 
Exhibit: AD-AS and the Inflation-Unemployment Cycle  
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle)
At point 4, if policymakers are concerned about economic performance, they will most likely respond by

Accepted Answer

A) increasing government purchases and the money supply. 
B) increasing taxes. 
C) decreasing aggregate demand. 
D) having the Fed sell bonds. 
A) increasing government purchases and the money supply. 
B) increasing taxes. 
C) decreasing aggregate demand. 
D) having the Fed sell bonds.

The essential feature of a stagflation phase is

Suppose an economy is operating with an inflationary gap.In this case, policymakers would Seek to move the economy

A Phillips phase of the inflation-unemployment relationship occurs when both inflation and unemployment increase.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) In the long run?

Use the following to answer questions Exhibit: The Inflation-Unemployment Cycle -(Exhibit: The Inflation-Unemployment Cycle) Expansionary policy to counter a recessionary gap would move the economy from point:

Consider the following statement: "President X expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course.'" Which of the following could have caused this phenomenon?

Frictional unemployment exists because

The notion that there is a tradeoff between inflation and unemployment is expressed as an efficiency wage curve.

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession.Which of the Following best explains this move?

What is a reservation wage?

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Use the following to answer questions Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) Suppose initially the economy was at point 1 and as a result of Stabilization policies, it is now at point 3.Consequently, there will be pressure for

Falling inflation means

Which of the following affect the values of inflation and unemployment? I.changes in government spending II.expectations about the price level III.changes in nominal wages IV.changes in money supply

Along an actual (observed) Phillips curve,

Use the following to answer questions Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from point 3 to point 4 is consistent with which phase Of the inflation-unemployment relationship?

Consider the following statement: "President X expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Identify the stage of the inflation-unemployment phase.

Suppose an economy is operating with a recessionary gap.In this case, policymakers would seek to move the economy

Use the following to answer questions Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) At point 4, if policymakers are concerned about economic performance, they will most likely respond by

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 16: Inflation and Unemployment

The essential feature of a stagflation phase is

Suppose an economy is operating with an inflationary gap.In this case, policymakers would Seek to move the economy

A Phillips phase of the inflation-unemployment relationship occurs when both inflation and unemployment increase.

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) In the long run?

Use the following to answer questions Exhibit: The Inflation-Unemployment Cycle -(Exhibit: The Inflation-Unemployment Cycle) Expansionary policy to counter a recessionary gap would move the economy from point:

Consider the following statement: "President X expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course.'" Which of the following could have caused this phenomenon?

Frictional unemployment exists because

The notion that there is a tradeoff between inflation and unemployment is expressed as an efficiency wage curve.

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession.Which of the Following best explains this move?

What is a reservation wage?

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Use the following to answer questions Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) Suppose initially the economy was at point 1 and as a result of Stabilization policies, it is now at point 3.Consequently, there will be pressure for

Falling inflation means

Which of the following affect the values of inflation and unemployment? I.changes in government spending II.expectations about the price level III.changes in nominal wages IV.changes in money supply

Along an actual (observed) Phillips curve,

Use the following to answer questions Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from point 3 to point 4 is consistent with which phase Of the inflation-unemployment relationship?

Consider the following statement: "President X expressed satisfaction with last year's economic performance.He said that with inflation and unemployment heading down, the nation 'is on the right course'." Identify the stage of the inflation-unemployment phase.

Suppose an economy is operating with a recessionary gap.In this case, policymakers would seek to move the economy

Use the following to answer questions Exhibit: AD-AS and the Inflation-Unemployment Cycle -(Exhibit: AD-AS and the Inflation-Unemployment Cycle) At point 4, if policymakers are concerned about economic performance, they will most likely respond by

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) In the long run?