Question 1

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. D

Question 2

Which statement best defines disinflation?

Accepted Answer

A)  It is a zero rate of inflation. 
B)  It is a constant rate of inflation. 
C)  It is a reduction in the rate of inflation. 
D)  It is a negative rate of inflation. 
A)  It is a zero rate of inflation. 
B)  It is a constant rate of inflation. 
C)  It is a reduction in the rate of inflation. 
D)  It is a negative rate of inflation. C

Question 3

How does the short-run Phillips curve model reflect an increase in the expected inflation?

Accepted Answer

A)  as a downward shift in the short-run Phillips curve 
B)  as an upward 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 downward shift in the short-run Phillips curve 
B)  as an upward 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 B

Question 4

Milton Friedman argued that a central bank's control over the money supply could be used to peg which of the following?

Accepted Answer

A)  the level or growth rate of a nominal variable, but not the level or growth rate of a real variable 
B)  the level of a nominal or real variable, but not the growth rate of a real or nominal variable 
C)  the level or growth rate of a real variable, but not the level or growth rate of a nominal variable 
D)  both levels and growth rates of both real and nominal variables 
A)  the level or growth rate of a nominal variable, but not the level or growth rate of a real variable 
B)  the level of a nominal or real variable, but not the growth rate of a real or nominal variable 
C)  the level or growth rate of a real variable, but not the level or growth rate of a nominal variable 
D)  both levels and growth rates of both real and nominal variables

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 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 6

How does a decrease in the expected rate of inflation shift the Phillips curves?

Accepted Answer

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

Question 7

In the long run, what will shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in the money supply 
C)  a decrease in government spending 
D)  tax cuts 
A)  an increase in the minimum wage 
B)  an increase in the money supply 
C)  a decrease in government spending 
D)  tax cuts

Question 8

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 9

What did Phillips discover?

Accepted Answer

A)  a positive relation between unemployment and inflation in the United Kingdom 
B)  a positive relation between unemployment and inflation in Canada 
C)  a negative relation between unemployment and inflation in Canada 
D)  a negative relation between unemployment and inflation in the United Kingdom 
A)  a positive relation between unemployment and inflation in the United Kingdom 
B)  a positive relation between unemployment and inflation in Canada 
C)  a negative relation between unemployment and inflation in Canada 
D)  a negative relation between unemployment and inflation in the United Kingdom

Question 10

Figure 16-3
  
-Refer to the Figure 16-3. Starting from c and 3, in the short run, where does an unexpected increase in money supply 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 11

If policymakers expand aggregate demand, what happens to inflation and unemployment?

Accepted Answer

A)  Inflation falls but unemployment rises. 
B)  Inflation and unemployment fall. 
C)  Inflation and unemployment rise. 
D)  Inflation rises but unemployment falls. 
A)  Inflation falls but unemployment rises. 
B)  Inflation and unemployment fall. 
C)  Inflation and unemployment rise. 
D)  Inflation rises but unemployment falls.

Question 12

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 13

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which statement best describes the sacrifice ratio for Canada?

Accepted Answer

A)  It falls over a range of 1 to 3. 
B)  It falls over a range of 2 to 5. 
C)  It falls over a range of 3 to 6. 
D)  It falls over a range of 5 to 7. 
A)  It falls over a range of 1 to 3. 
B)  It falls over a range of 2 to 5. 
C)  It falls over a range of 3 to 6. 
D)  It falls over a range of 5 to 7.

Question 16

In recent years, inflation expectations have fallen. How did this shift the short-run Phillips curve, and what are the implications for unemployment?

Accepted Answer

A)  This shifted the short-run Phillips curve left, meaning that at any given inflation rate, unemployment will be lower in the short run than before. 
B)  This shifted the short-run Phillips curve right, meaning that at any given inflation rate, unemployment will be lower in the short run than before. 
C)  This shifted the short-run Phillips curve right, meaning that at any given inflation rate, unemployment will be higher in the short run than before. 
D)  This shifted the short-run Phillips curve left, meaning that at any given inflation rate. unemployment will be higher in the short run than before. 
A)  This shifted the short-run Phillips curve left, meaning that at any given inflation rate, unemployment will be lower in the short run than before. 
B)  This shifted the short-run Phillips curve right, meaning that at any given inflation rate, unemployment will be lower in the short run than before. 
C)  This shifted the short-run Phillips curve right, meaning that at any given inflation rate, unemployment will be higher in the short run than before. 
D)  This shifted the short-run Phillips curve left, meaning that at any given inflation rate. unemployment will be higher in the short run than before.

Question 17

How will a favourable supply shock shift the short-run Phillips curve, and how does unemployment change?

Accepted Answer

A)  It will shift the short-run Phillips curve right, and unemployment will rise. 
B)  It will shift the short-run Phillips curve right, and unemployment will fall. 
C)  It will shift the short-run Phillips curve left, and unemployment will rise. 
D)  It will shift the short-run Phillips curve left, and unemployment will fall. 
A)  It will shift the short-run Phillips curve right, and unemployment will rise. 
B)  It will shift the short-run Phillips curve right, and unemployment will fall. 
C)  It will shift the short-run Phillips curve left, and unemployment will rise. 
D)  It will shift the short-run Phillips curve left, and unemployment will fall.

Question 18

Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant "a" in the short-run Phillips curve equation is 0.8. Describe the process of adjustment when the expected inflation rate changes from 2 percent to 3 percent.

Accepted Answer

First, the actual inflation rate increas

Question 19

Discuss the factors determining the slope of the short-run Phillips curve. Is the linear shape appropriate? Why, or why not?

Accepted Answer

The short-run Phillips curve (SRPC) was

Question 20

Which statement 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.

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

Which statement best defines disinflation?

How does the short-run Phillips curve model reflect an increase in the expected inflation?

Milton Friedman argued that a central bank's control over the money supply could be used to peg which of the following?

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?

How does a decrease in the expected rate of inflation shift the Phillips curves?

In the long run, what will shift the long-run Phillips curve to the right?

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

What did Phillips discover?

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

If policymakers expand aggregate demand, what happens to inflation and unemployment?

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

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

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 statement best describes the sacrifice ratio for Canada?

In recent years, inflation expectations have fallen. How did this shift the short-run Phillips curve, and what are the implications for unemployment?

How will a favourable supply shock shift the short-run Phillips curve, and how does unemployment change?

Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant "a" in the short-run Phillips curve equation is 0.8. Describe the process of adjustment when the expected inflation rate changes from 2 percent to 3 percent.

Discuss the factors determining the slope of the short-run Phillips curve. Is the linear shape appropriate? Why, or why not?

Which statement characterizes the long-run Phillips curve?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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

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

Which statement best defines disinflation?

How does the short-run Phillips curve model reflect an increase in the expected inflation?

Milton Friedman argued that a central bank's control over the money supply could be used to peg which of the following?

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?

How does a decrease in the expected rate of inflation shift the Phillips curves?

In the long run, what will shift the long-run Phillips curve to the right?

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

What did Phillips discover?

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

If policymakers expand aggregate demand, what happens to inflation and unemployment?

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

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

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 statement best describes the sacrifice ratio for Canada?

In recent years, inflation expectations have fallen. How did this shift the short-run Phillips curve, and what are the implications for unemployment?

How will a favourable supply shock shift the short-run Phillips curve, and how does unemployment change?

Suppose the natural rate of unemployment is 6 percent, the expected inflation is 2 percent, and the constant "a" in the short-run Phillips curve equation is 0.8. Describe the process of adjustment when the expected inflation rate changes from 2 percent to 3 percent.

Discuss the factors determining the slope of the short-run Phillips curve. Is the linear shape appropriate? Why, or why not?

Which statement characterizes the long-run Phillips curve?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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