Question 1

Suppose the minimum wage decreased.At any given rate of inflation,what would happen to output and employment?

Accepted Answer

A) Both output and employment would be higher. 
B) Both output and employment would be lower. 
C) Output would be higher and unemployment would be lower. 
D) Unemployment would be lower and output would be higher. 
A) Both output and employment would be higher. 
B) Both output and employment would be lower. 
C) Output would be higher and unemployment would be lower. 
D) Unemployment would be lower and output would be higher.

Question 2

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Accepted Answer

A) True 
 B)False

Question 3

The position of the long-run Phillips curve depends on what?

Accepted Answer

A) the natural rate of unemployment 
B) the actual rate of unemployment 
C) the actual inflation rate 
D) the expected inflation rate 
A) the natural rate of unemployment 
B) the actual rate of unemployment 
C) the actual inflation rate 
D) the expected inflation rate

Question 4

Which of the following data supported A.W.Phillips' findings?

Accepted Answer

A) data from 1861-1957 for the United Kingdom 
B) data from 1861-1957 for the United States 
C) data mostly from the post-World War II period in the United Kingdom 
D) data mostly from the post-World War II period in the United States 
A) data from 1861-1957 for the United Kingdom 
B) data from 1861-1957 for the United States 
C) data mostly from the post-World War II period in the United Kingdom 
D) data mostly from the post-World War II period in the United States

Question 5

Figure 16-1
  
-Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in the money supply growth rate move the economy?

Accepted Answer

A) e and 1 
B) d and 2 
C) d and 3 
D) a and 3 
A) e and 1 
B) d and 2 
C) d and 3 
D) a and 3

Question 6

How does an increase in the aggregate demand translate in the Phillips curve model?

Accepted Answer

A) as an upward movement along the short-run Phillips curve 
B) as a shift to the right of the short-run Phillips curve 
C) as a downward movement along the short-run Phillips curve 
D) as a shift to the left of the short-run Phillips curve 
A) as an upward movement along the short-run Phillips curve 
B) as a shift to the right of the short-run Phillips curve 
C) as a downward movement along the short-run Phillips curve 
D) as a shift to the left of the short-run Phillips curve

Question 7

How does the short-run Phillips curve reflect a financial crisis as the one in 2008-2009?

Accepted Answer

A) as a leftward shift in the short-run Phillips curve 
B) as a rightward shift in the short-run Phillips curve 
C) as a downward movement along the short-run Phillips curve 
D) as an upward movement along the short-run Phillips curve 
A) as a leftward shift in the short-run Phillips curve 
B) as a rightward shift in the short-run Phillips curve 
C) as a downward movement along the short-run Phillips curve 
D) as an upward movement along the short-run Phillips curve

Question 8

How will a favourable supply shock shift short-run aggregate supply,and how will output change?

Accepted Answer

A) It will shift short-run aggregate supply left, making output rise. 
B) It will shift short-run aggregate supply left, making output fall. 
C) It will shift short-run aggregate supply right, making output rise. 
D) It will shift short-run aggregate supply right, making output fall. 
A) It will shift short-run aggregate supply left, making output rise. 
B) It will shift short-run aggregate supply left, making output fall. 
C) It will shift short-run aggregate supply right, making output rise. 
D) It will shift short-run aggregate supply right, making output fall.

Question 9

Figure 16-1
  
-Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does an increase in government expenditures move the economy?

Accepted Answer

A) b and 2 
B) e and 3 
C) d and 3 
D) c and 2 
A) b and 2 
B) e and 3 
C) d and 3 
D) c and 2

Question 10

Which of the following would shift aggregate supply to the right?

Accepted Answer

A) increasing commodity prices 
B) an increase in money supply 
C) an increase in wages 
D) the discovery of a new, cheaper form of energy 
A) increasing commodity prices 
B) an increase in money supply 
C) an increase in wages 
D) the discovery of a new, cheaper form of energy

Question 11

Figure 16-3
  
-Refer to the Figure 16-3.Starting from c and 3,in the long run,where does an increase in money supply growth move the economy to?

Accepted Answer

A) a and 1 
B) e and 4 
C) d and 4 
D) e and 5 
A) a and 1 
B) e and 4 
C) d and 4 
D) e and 5

Question 12

Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output.What is this country's sacrifice ratio?

Accepted Answer

A) 3 
B) 3.5 
C) 4 
D) 12 
A) 3 
B) 3.5 
C) 4 
D) 12

Question 13

A decrease in expected inflation shifts which of the following curves,and in what direction?

Accepted Answer

A) It shifts the short-run Phillips curve right. 
B) It shifts the short-run Phillips curve left. 
C) It shifts the long-run Phillips curve right. 
D) It shifts the long-run Phillips curve left. 
A) It shifts the short-run Phillips curve right. 
B) It shifts the short-run Phillips curve left. 
C) It shifts the long-run Phillips curve right. 
D) It shifts the long-run Phillips curve left.

Question 14

Figure 16-3
  
-Refer to the Figure 16-3.Starting from c and 3,where does an increase in aggregate demand move the economy to,in the short run and the long run?

Accepted Answer

A) a and 1 in the short run, b and 2 in the long run 
B) b and 2 in the short run, a and 1 in the long run 
C) d and 4 in the short run, e and 5 in the long run 
D) d and 2 in the short run, a and 5 in the long run 
A) a and 1 in the short run, b and 2 in the long run 
B) b and 2 in the short run, a and 1 in the long run 
C) d and 4 in the short run, e and 5 in the long run 
D) d and 2 in the short run, a and 5 in the long run

Question 15

What did Friedman and Phelps argue about inflation and unemployment?

Accepted Answer

A) that in the long run, monetary growth did not influence those factors that determine the unemployment rate 
B) that the Phillips curve could be exploited in the long run by using monetary, but not fiscal policy 
C) that the short-run Phillips curve was very steep 
D) that there was neither a short-run nor long-run tradeoff between inflation and unemployment 
A) that in the long run, monetary growth did not influence those factors that determine the unemployment rate 
B) that the Phillips curve could be exploited in the long run by using monetary, but not fiscal policy 
C) that the short-run Phillips curve was very steep 
D) that there was neither a short-run nor long-run tradeoff between inflation and unemployment

Question 16

Figure 16-3
  
-Refer to the Figure 16-3.Starting from c and 3,in the short run,where does an unexpected decrease in money supply growth move the economy to?

Accepted Answer

A) a and 1 
B) b and 2 
C) e and 5 
D) d and 4 
A) a and 1 
B) b and 2 
C) e and 5 
D) d and 4

Question 17

In the nineteenth century,some countries were on gold standards so that on average the money supply growth rate was close to zero and expected inflation was more or less constant.For these countries during this time period,we find that increases in inflation were generally associated with falling unemployment.Are these findings consistent with Friedman and Phelps's theories,and why?

Accepted Answer

A) Yes, because they argued that when inflation was higher than expected, unemployment would fall. 
B) Yes, because they argued that when prices rose unemployment would fall, whether actual inflation was higher than expected or not. 
C) No, because they argued that higher inflation would increase unemployment. 
D) No, because they argued that inflation and unemployment were unrelated. 
A) Yes, because they argued that when inflation was higher than expected, unemployment would fall. 
B) Yes, because they argued that when prices rose unemployment would fall, whether actual inflation was higher than expected or not. 
C) No, because they argued that higher inflation would increase unemployment. 
D) No, because they argued that inflation and unemployment were unrelated.

Question 18

Which of the following is a long-run economic aspect on which most economists agree?

Accepted Answer

A) The natural rate of unemployment depends primarily on the level of aggregate demand. 
B) Inflation depends primarily upon the money supply growth rate. 
C) There is a tradeoff between the inflation rate and the natural rate of unemployment. 
D) The rate of economic growth depends primarily on the growth in money supply. 
A) The natural rate of unemployment depends primarily on the level of aggregate demand. 
B) Inflation depends primarily upon the money supply growth rate. 
C) There is a tradeoff between the inflation rate and the natural rate of unemployment. 
D) The rate of economic growth depends primarily on the growth in money supply.

Question 19

Figure 16-4
  
-Refer to the Figure 16-4.At point b,how do actual and expected inflation rates and unemployment rates compare?

Accepted Answer

A) The actual inflation rate is less than the expected inflation rate, and the actual rate of unemployment exceeds the natural rate of unemployment. 
B) The actual inflation rate is greater than the expected inflation rate, and the actual rate of unemployment exceeds the natural rate of unemployment. 
C) The actual inflation rate is less than the expected inflation rate, and the actual rate of unemployment is less than the natural rate of unemployment. 
D) The actual inflation rate is greater than the expected inflation rate, and the actual rate of unemployment is less than the natural rate of unemployment. 
A) The actual inflation rate is less than the expected inflation rate, and the actual rate of unemployment exceeds the natural rate of unemployment. 
B) The actual inflation rate is greater than the expected inflation rate, and the actual rate of unemployment exceeds the natural rate of unemployment. 
C) The actual inflation rate is less than the expected inflation rate, and the actual rate of unemployment is less than the natural rate of unemployment. 
D) The actual inflation rate is greater than the expected inflation rate, and the actual rate of unemployment is less than the natural rate of unemployment.

Question 20

Which of the following best describes how the natural rate of unemployment changes?

Accepted Answer

A) It cannot change; it is constant over time. 
B) It does not change by any actions of the government. 
C) It changes by changing the maximum legal number of work hours a week. 
D) It changes by changing the rate at which the Bank of Canada increases the money supply. 
A) It cannot change; it is constant over time. 
B) It does not change by any actions of the government. 
C) It changes by changing the maximum legal number of work hours a week. 
D) It changes by changing the rate at which the Bank of Canada increases the money supply.

Suppose the minimum wage decreased.At any given rate of inflation,what would happen to output and employment?

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

The position of the long-run Phillips curve depends on what?

Which of the following data supported A.W.Phillips' findings?

Figure 16-1 -Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in the money supply growth rate move the economy?

How does an increase in the aggregate demand translate in the Phillips curve model?

How does the short-run Phillips curve reflect a financial crisis as the one in 2008-2009?

How will a favourable supply shock shift short-run aggregate supply,and how will output change?

Figure 16-1 -Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does an increase in government expenditures move the economy?

Which of the following would shift aggregate supply to the right?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does an increase in money supply growth move the economy to?

Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output.What is this country's sacrifice ratio?

A decrease in expected inflation shifts which of the following curves,and in what direction?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,where does an increase in aggregate demand move the economy to,in the short run and the long run?

What did Friedman and Phelps argue about inflation and unemployment?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the short run,where does an unexpected decrease in money supply growth move the economy to?

Which of the following is a long-run economic aspect on which most economists agree?

Figure 16-4 -Refer to the Figure 16-4.At point b,how do actual and expected inflation rates and unemployment rates compare?

Which of the following best describes how the natural rate of unemployment changes?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Five Debates over Macroeconomic Policy

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Exam 16: The Short-Run Tradeoff between Inflation and Unemployment

Suppose the minimum wage decreased.At any given rate of inflation,what would happen to output and employment?

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

The position of the long-run Phillips curve depends on what?

Which of the following data supported A.W.Phillips' findings?

Figure 16-1 -Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in the money supply growth rate move the economy?

How does an increase in the aggregate demand translate in the Phillips curve model?

How does the short-run Phillips curve reflect a financial crisis as the one in 2008-2009?

How will a favourable supply shock shift short-run aggregate supply,and how will output change?

Figure 16-1 -Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does an increase in government expenditures move the economy?

Which of the following would shift aggregate supply to the right?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does an increase in money supply growth move the economy to?

Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output.What is this country's sacrifice ratio?

A decrease in expected inflation shifts which of the following curves,and in what direction?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,where does an increase in aggregate demand move the economy to,in the short run and the long run?

What did Friedman and Phelps argue about inflation and unemployment?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the short run,where does an unexpected decrease in money supply growth move the economy to?

Which of the following is a long-run economic aspect on which most economists agree?

Figure 16-4 -Refer to the Figure 16-4.At point b,how do actual and expected inflation rates and unemployment rates compare?

Which of the following best describes how the natural rate of unemployment changes?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Five Debates over Macroeconomic Policy

Filters