Question 1

Which of the following changes will move the economy to a point on the Phillips curve where unemployment is lower?

Accepted Answer

A) lower inflation 
B) lower taxes 
C) a decrease the money supply 
D) higher expectations about inflation 
A) lower inflation 
B) lower taxes 
C) a decrease the money supply 
D) higher expectations about inflation

Question 2

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 taxes move the economy?

Accepted Answer

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

Question 3

In the long run,what effect does an increase in the money supply have on prices and unemployment?

Accepted Answer

A) It leaves prices and unemployment unchanged. 
B) It raises prices and unemployment. 
C) It raises prices and leaves unemployment unchanged. 
D) It leaves prices unchanged and reduces unemployment. 
A) It leaves prices and unemployment unchanged. 
B) It raises prices and unemployment. 
C) It raises prices and leaves unemployment unchanged. 
D) It leaves prices unchanged and reduces unemployment.

Question 4

Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Accepted Answer

In the short run,unemployment will rise,

Question 5

Which of the following would cause the price level to rise and output to fall in the short run?

Accepted Answer

A) an increase in the money supply 
B) a decrease in the money supply 
C) an adverse supply shock 
D) a favourable supply shock 
A) an increase in the money supply 
B) a decrease in the money supply 
C) an adverse supply shock 
D) a favourable supply shock

Question 6

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Accepted Answer

A) where expected inflation is greater than actual inflation 
B) where expected inflation equals actual inflation 
C) where the quantity of goods and services demanded equals the quantity supplied 
D) where the quantity of labour demanded equals the quantity supplied 
A) where expected inflation is greater than actual inflation 
B) where expected inflation equals actual inflation 
C) where the quantity of goods and services demanded equals the quantity supplied 
D) where the quantity of labour demanded equals the quantity supplied

Question 7

How were inflation and unemployment from 1980 to 1989 in Canada?

Accepted Answer

A) Inflation was relatively low, and there were no fluctuations in unemployment. 
B) Inflation was relatively low, and unemployment was high. 
C) Unemployment was relatively low, but there were large fluctuations in inflation. 
D) There were relatively large fluctuations in both unemployment and inflation. 
A) Inflation was relatively low, and there were no fluctuations in unemployment. 
B) Inflation was relatively low, and unemployment was high. 
C) Unemployment was relatively low, but there were large fluctuations in inflation. 
D) There were relatively large fluctuations in both unemployment and inflation.

Question 8

In the long run,if the Bank of Canada decreases the rate at which it increases the money supply,what will happen to inflation and unemployment?

Accepted Answer

A) Inflation and unemployment will be higher. 
B) Inflation will be higher and unemployment will be lower. 
C) Inflation will be lower and unemployment will be higher. 
D) Inflation will be lower and unemployment will stay the same. 
A) Inflation and unemployment will be higher. 
B) Inflation will be higher and unemployment will be lower. 
C) Inflation will be lower and unemployment will be higher. 
D) Inflation will be lower and unemployment will stay the same.

Question 9

Figure 16-4
  
-Refer to the Figure 16-4.If the economy is at point c and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short and long run?

Accepted Answer

A) point b in the short run and point c in the long run 
B) point m in the short run and point c in the long run 
C) point d in the short run and point h in the long run 
D) point h in the short run and point d in the long run 
A) point b in the short run and point c in the long run 
B) point m in the short run and point c in the long run 
C) point d in the short run and point h in the long run 
D) point h in the short run and point d in the long run

Question 10

Which of the following characterizes the long-run Phillips curve?

Accepted Answer

A) Its position is determined primarily by monetary factors. 
B) If it shifts right, long-run aggregate supply shifts right. 
C) It cannot be changed by any government policy. 
D) Its position depends on the natural rate of unemployment. 
A) Its position is determined primarily by monetary factors. 
B) If it shifts right, long-run aggregate supply shifts right. 
C) It cannot be changed by any government policy. 
D) Its position depends on the natural rate of unemployment.

Question 11

Figure 16-2
  
-Refer to the Figure 16-2.Where is the money supply growth rate the greatest?

Accepted Answer

A) at a 
B) at b 
C) at c 
D) at e 
A) at a 
B) at b 
C) at c 
D) at e

Question 12

In the long run,what are the effects of a decrease in the rate of growth of the money supply on the Phillips curves?

Accepted Answer

A) It shifts both the long-run and the short-run Phillips curves right. 
B) It shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C) It shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D) It leaves the long-run Phillips curve unchanged and shifts the short-run Phillips curve left. 
A) It shifts both the long-run and the short-run Phillips curves right. 
B) It shifts the long-run Phillips curve left and the short-run Phillips curve right. 
C) It shifts the long-run Phillips curve right and the short-run Phillips curve left. 
D) It leaves the long-run Phillips curve unchanged and shifts the short-run Phillips curve left.

Question 13

Suppose that in response to an adverse aggregate supply shock,the Bank of Canada increased the money supply.What would happen to unemployment and inflation?

Accepted Answer

A) Unemployment and inflation would both rise. 
B) Unemployment and inflation would both fall. 
C) Unemployment would rise and inflation would fall. 
D) Unemployment would fall and inflation would rise. 
A) Unemployment and inflation would both rise. 
B) Unemployment and inflation would both fall. 
C) Unemployment would rise and inflation would fall. 
D) Unemployment would fall and inflation would rise.

Question 14

What will an adverse supply shock cause output and prices to do?

Accepted Answer

A) It will cause output and prices to rise. 
B) It will cause output and prices to fall. 
C) It will cause output to rise and prices to fall. 
D) It will cause output to fall and prices to rise. 
A) It will cause output and prices to rise. 
B) It will cause output and prices to fall. 
C) It will cause output to rise and prices to fall. 
D) It will cause output to fall and prices to rise.

Question 15

Figure 16-4
  
-Refer to the Figure 16-4.What is the natural rate of unemployment?

Accepted Answer

A) 0 percent 
B) 2 percent 
C) 5 percent 
D) 8 percent 
A) 0 percent 
B) 2 percent 
C) 5 percent 
D) 8 percent

Question 16

If the short-run Phillips curve were stable,which of the following would be unusual?

Accepted Answer

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

Question 17

Which Canadian economist confirmed the theory of an inflation-unemployment tradeoff?

Accepted Answer

A) R. Lipsey 
B) A.W. Phillips 
C) P. Samuelson 
D) R. Solow 
A) R. Lipsey 
B) A.W. Phillips 
C) P. Samuelson 
D) R. Solow

Question 18

Some economists argue that simply and suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work.For example,if a government cuts money growth but makes no real reform,people expect that the government will soon start printing more money again to pay for its expenditures,and the promise to fight inflation will not be credible.Explain the importance of an inflation-reduction policy that is announced ahead of time and is credible.

Accepted Answer

In a country where expected inflation ha

Question 19

Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?

Accepted Answer

A) Unemployment would be higher, and output would be lower. 
B) Unemployment would be higher, and output would be higher. 
C) Unemployment would be lower, and output would be lower. 
D) Unemployment would be lower, and output would be higher. 
A) Unemployment would be higher, and output would be lower. 
B) Unemployment would be higher, and output would be higher. 
C) Unemployment would be lower, and output would be lower. 
D) Unemployment would be lower, and output would be higher.

Question 20

Figure 16-4
  
-Refer to the Figure 16-4.Along LRPC,what is the expected rate of inflation?

Accepted Answer

A) 0 percent 
B) the actual rate of inflation 
C) 3 percent 
D) the natural rate of inflation 
A) 0 percent 
B) the actual rate of inflation 
C) 3 percent 
D) the natural rate of inflation

Which of the following changes will move the economy to a point on the Phillips curve where unemployment is lower?

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 taxes move the economy?

In the long run,what effect does an increase in the money supply have on prices and unemployment?

Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Which of the following would cause the price level to rise and output to fall in the short run?

Where does the short-run Phillips curve intersect the long-run Phillips curve?

How were inflation and unemployment from 1980 to 1989 in Canada?

In the long run,if the Bank of Canada decreases the rate at which it increases the money supply,what will happen to inflation and unemployment?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point c and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short and long run?

Which of the following characterizes the long-run Phillips curve?

Figure 16-2 -Refer to the Figure 16-2.Where is the money supply growth rate the greatest?

In the long run,what are the effects of a decrease in the rate of growth of the money supply on the Phillips curves?

Suppose that in response to an adverse aggregate supply shock,the Bank of Canada increased the money supply.What would happen to unemployment and inflation?

What will an adverse supply shock cause output and prices to do?

Figure 16-4 -Refer to the Figure 16-4.What is the natural rate of unemployment?

If the short-run Phillips curve were stable,which of the following would be unusual?

Which Canadian economist confirmed the theory of an inflation-unemployment tradeoff?

Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?

Figure 16-4 -Refer to the Figure 16-4.Along LRPC,what is the expected rate of inflation?

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

Which of the following changes will move the economy to a point on the Phillips curve where unemployment is lower?

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 taxes move the economy?

In the long run,what effect does an increase in the money supply have on prices and unemployment?

Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Which of the following would cause the price level to rise and output to fall in the short run?

Where does the short-run Phillips curve intersect the long-run Phillips curve?

How were inflation and unemployment from 1980 to 1989 in Canada?

In the long run,if the Bank of Canada decreases the rate at which it increases the money supply,what will happen to inflation and unemployment?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point c and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short and long run?

Which of the following characterizes the long-run Phillips curve?

Figure 16-2 -Refer to the Figure 16-2.Where is the money supply growth rate the greatest?

In the long run,what are the effects of a decrease in the rate of growth of the money supply on the Phillips curves?

Suppose that in response to an adverse aggregate supply shock,the Bank of Canada increased the money supply.What would happen to unemployment and inflation?

What will an adverse supply shock cause output and prices to do?

Figure 16-4 -Refer to the Figure 16-4.What is the natural rate of unemployment?

If the short-run Phillips curve were stable,which of the following would be unusual?

Which Canadian economist confirmed the theory of an inflation-unemployment tradeoff?

Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?

Figure 16-4 -Refer to the Figure 16-4.Along LRPC,what is the expected rate of inflation?

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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