Question 1

Which of the following is most likely to lead to demand-side inflation?

Accepted Answer

A)  an increase in government spending 
B)  a decrease in taxes 
C)  an increase in the money supply 
D)  All of the above are correct. 
A)  an increase in government spending 
B)  a decrease in taxes 
C)  an increase in the money supply 
D)  All of the above are correct. D

Question 2

According to rational expectations theory,a long period of unemployment is necessary to reduce inflation.

Accepted Answer

A) True 
 B)False  False

Question 3

In the face of the 2007-2009 recession,the President,Congress,and the Fed

Accepted Answer

A)  decided to rely on the self-correcting mechanism of the economy to eliminate inflation. 
B)  decided to rely on the self-correcting mechanism of the economy to reduce unemployment. 
C)  pursued an active policy to balance the budget and fight inflation. 
D)  pursued an active policy to expand aggregate demand. 
A)  decided to rely on the self-correcting mechanism of the economy to eliminate inflation. 
B)  decided to rely on the self-correcting mechanism of the economy to reduce unemployment. 
C)  pursued an active policy to balance the budget and fight inflation. 
D)  pursued an active policy to expand aggregate demand. D

Question 4

Define the following terms and explain their importance to the study of macroeconomics:
a.Phillips curve
b.rational expectations
c.indexing
d.stagflation

Accepted Answer

a.A Phillips curve is a graph depicting

Question 5

Figure 17-8
  
-In Figure 17-8,which of the following movements reflects the closing of a recessionary gap through the economy's self-correcting mechanism?

Accepted Answer

A)  A to B 
B)  A to C 
C)  C to E 
D)  D to E 
A)  A to B 
B)  A to C 
C)  C to E 
D)  D to E

Question 6

The theory of rational expectations says that

Accepted Answer

A)  workers make excellent choices of places to work. 
B)  workers make the best possible forecasts of inflation. 
C)  economists make rational expectations of inflation. 
D)  economists expect workers to be rational. 
A)  workers make excellent choices of places to work. 
B)  workers make the best possible forecasts of inflation. 
C)  economists make rational expectations of inflation. 
D)  economists expect workers to be rational.

Question 7

Figure 17-4
  
-Figure 17-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Accepted Answer

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

Question 8

Demand-side inflation is normally accompanied by

Accepted Answer

A)  falling real GDP, while supply-side inflation may be accompanied by rising real GDP. 
B)  falling real GDP; the same is t of supply-side inflation. 
C)  rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
D)  rising real GDP; the same is t of supply-side inflation. 
A)  falling real GDP, while supply-side inflation may be accompanied by rising real GDP. 
B)  falling real GDP; the same is t of supply-side inflation. 
C)  rising real GDP, while supply-side inflation may be accompanied by falling real GDP. 
D)  rising real GDP; the same is t of supply-side inflation.

Question 9

The Phillips curve shows the relationship between the rate of inflation and the rate of growth of real GDP.

Accepted Answer

A) True 
 B)False

Question 10

If the favorable supply shocks of the 1990s were reversed in the future,we should expect a(n)

Accepted Answer

A)  increase in inflation and unemployment. 
B)  decrease in inflation and unemployment. 
C)  increase in inflation and a decrease in unemployment. 
D)  decrease in inflation and an increase in unemployment. 
A)  increase in inflation and unemployment. 
B)  decrease in inflation and unemployment. 
C)  increase in inflation and a decrease in unemployment. 
D)  decrease in inflation and an increase in unemployment.

Question 11

In the 1970s,why did the short-run Phillips curve fail to depict the unemployment-inflation trade-off?

Accepted Answer

The 1970s were affected by the twin OPEC

Question 12

The rational expectations theory claims that workers and firms will not make systematic errors when they forecast inflation.

Accepted Answer

A) True 
 B)False

Question 13

In December of 2007,with an unemployment rate of 5.0 percent,most economists believed this was above the natural rate.

Accepted Answer

A) True 
 B)False

Question 14

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

Accepted Answer

First,long-term contracts may be based o

Question 15

If policy makers do nothing in response to an inflationary gap,what will happen?

Accepted Answer

A)  a rapid movement toward lower unemployment and higher inflation 
B)  a rapid movement toward lower unemployment and lower inflation 
C)  a slow movement toward higher unemployment and higher inflation 
D)  a slow movement toward lower unemployment and lower inflation 
A)  a rapid movement toward lower unemployment and higher inflation 
B)  a rapid movement toward lower unemployment and lower inflation 
C)  a slow movement toward higher unemployment and higher inflation 
D)  a slow movement toward lower unemployment and lower inflation

Question 16

A reduction in aggregate demand will normally reduce

Accepted Answer

A)  prices. 
B)  real GDP. 
C)  employment. 
D)  All of the above are correct. 
A)  prices. 
B)  real GDP. 
C)  employment. 
D)  All of the above are correct.

Question 17

The U.S.economy in the 1990s benefited from an aggregate supply curve shifting outward.

Accepted Answer

A) True 
 B)False

Question 18

The unemployment rate was increasing from 6 percent to 7 percent could be interpreted as an increase in the natural rate of

Accepted Answer

A)  inflation. 
B)  unemployment. 
C)  economic growth. 
D)  aggregate supply. 
A)  inflation. 
B)  unemployment. 
C)  economic growth. 
D)  aggregate supply.

Question 19

If the self-correcting mechanism operates quickly,

Accepted Answer

A)  direct intervention is less necessary to close a recessionary gap. 
B)  fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. 
C)  monetary policy is far more useful in closing a recessionary gap than fiscal policy. 
D)  fiscal stimulus is ineffective and inflation will occur. 
A)  direct intervention is less necessary to close a recessionary gap. 
B)  fiscal stimulus is far more useful in closing a recessionary gap than monetary policy. 
C)  monetary policy is far more useful in closing a recessionary gap than fiscal policy. 
D)  fiscal stimulus is ineffective and inflation will occur.

Question 20

Keynesian economists generally agree that unemployment is more costly than inflation.

Accepted Answer

A) True 
 B)False

Which of the following is most likely to lead to demand-side inflation?

According to rational expectations theory,a long period of unemployment is necessary to reduce inflation.

In the face of the 2007-2009 recession,the President,Congress,and the Fed

Define the following terms and explain their importance to the study of macroeconomics: a.Phillips curve b.rational expectations c.indexing d.stagflation

Figure 17-8 -In Figure 17-8,which of the following movements reflects the closing of a recessionary gap through the economy's self-correcting mechanism?

The theory of rational expectations says that

Figure 17-4 -Figure 17-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Demand-side inflation is normally accompanied by

The Phillips curve shows the relationship between the rate of inflation and the rate of growth of real GDP.

If the favorable supply shocks of the 1990s were reversed in the future,we should expect a(n)

In the 1970s,why did the short-run Phillips curve fail to depict the unemployment-inflation trade-off?

The rational expectations theory claims that workers and firms will not make systematic errors when they forecast inflation.

In December of 2007,with an unemployment rate of 5.0 percent,most economists believed this was above the natural rate.

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

If policy makers do nothing in response to an inflationary gap,what will happen?

A reduction in aggregate demand will normally reduce

The U.S.economy in the 1990s benefited from an aggregate supply curve shifting outward.

The unemployment rate was increasing from 6 percent to 7 percent could be interpreted as an increase in the natural rate of

If the self-correcting mechanism operates quickly,

Keynesian economists generally agree that unemployment is more costly than inflation.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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Exam 17: The Trade Off between Inflation and Unemployment

Which of the following is most likely to lead to demand-side inflation?

According to rational expectations theory,a long period of unemployment is necessary to reduce inflation.

In the face of the 2007-2009 recession,the President,Congress,and the Fed

Define the following terms and explain their importance to the study of macroeconomics: a.Phillips curve b.rational expectations c.indexing d.stagflation

Figure 17-8 -In Figure 17-8,which of the following movements reflects the closing of a recessionary gap through the economy's self-correcting mechanism?

The theory of rational expectations says that

Figure 17-4 -Figure 17-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Demand-side inflation is normally accompanied by

The Phillips curve shows the relationship between the rate of inflation and the rate of growth of real GDP.

If the favorable supply shocks of the 1990s were reversed in the future,we should expect a(n)

In the 1970s,why did the short-run Phillips curve fail to depict the unemployment-inflation trade-off?

The rational expectations theory claims that workers and firms will not make systematic errors when they forecast inflation.

In December of 2007,with an unemployment rate of 5.0 percent,most economists believed this was above the natural rate.

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

If policy makers do nothing in response to an inflationary gap,what will happen?

A reduction in aggregate demand will normally reduce

The U.S.economy in the 1990s benefited from an aggregate supply curve shifting outward.

The unemployment rate was increasing from 6 percent to 7 percent could be interpreted as an increase in the natural rate of

If the self-correcting mechanism operates quickly,

Keynesian economists generally agree that unemployment is more costly than inflation.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters