Question 1

According to classical macroeconomic theory, what does money growth influence in the long run?

Accepted Answer

A)  both real and nominal variables 
B)  the unemployment rate and output 
C)  only real variables 
D)  only nominal variables 
A)  both real and nominal variables 
B)  the unemployment rate and output 
C)  only real variables 
D)  only nominal variables

Question 2

In the long run, the inflation rate depends primarily on money supply growth.

Accepted Answer

A) True 
 B)False

Question 3

Which term refers to the short-run relationship between inflation and unemployment?

Accepted Answer

A)  equity-efficiency tradeoff 
B)  money neutrality 
C)  the Phillips curve 
D)  the Keynesian cross 
A)  equity-efficiency tradeoff 
B)  money neutrality 
C)  the Phillips curve 
D)  the Keynesian cross

Question 4

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, what are the values of unemployment and inflation?

Accepted Answer

A)  Unemployment equals the natural rate, and expected inflation equals actual inflation. 
B)  Unemployment is above the natural rate, and expected inflation equals actual inflation. 
C)  Unemployment equals the natural rate, and expected inflation is lower than actual inflation. 
D)  Unemployment is below the natural rate, and inflation is greater than the expected rate. 
A)  Unemployment equals the natural rate, and expected inflation equals actual inflation. 
B)  Unemployment is above the natural rate, and expected inflation equals actual inflation. 
C)  Unemployment equals the natural rate, and expected inflation is lower than actual inflation. 
D)  Unemployment is below the natural rate, and inflation is greater than the expected rate.

Question 5

Use the AD/AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Accepted Answer

With perfect capital mobility, the centr

Question 6

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 7

How will an adverse supply shock shift the short-run Phillips curve, and how will it change unemployment?

Accepted Answer

A)  It will shift the short-run Phillips curve right and raise unemployment. 
B)  It will shift the short-run Phillips curve right and lower unemployment. 
C)  It will shift the short-run Phillips curve left and raise unemployment. 
D)  It will shift the short-run Phillips curve left and lower unemployment. 
A)  It will shift the short-run Phillips curve right and raise unemployment. 
B)  It will shift the short-run Phillips curve right and lower unemployment. 
C)  It will shift the short-run Phillips curve left and raise unemployment. 
D)  It will shift the short-run Phillips curve left and lower unemployment.

Question 8

Suppose that a central bank increases the money supply. According to the Phillips curve, what should happen to prices, output, and employment?

Accepted Answer

A)  Prices, output, and employment all rise. 
B)  Prices and output rise, and employment falls. 
C)  Prices rise, and output and employment fall. 
D)  Prices fall, and output and employment rise. 
A)  Prices, output, and employment all rise. 
B)  Prices and output rise, and employment falls. 
C)  Prices rise, and output and employment fall. 
D)  Prices fall, and output and employment rise.

Question 9

The vertical long-run Phillips curve is an exception to monetary neutrality implied by the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 10

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie

Question 11

Figure 16-3
  
-Refer to the Figure 16-3. When would the economy move from c and 3 to e and 5?

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly 
B)  in the short run if money supply growth decreased unexpectedly 
C)  in the long run if money supply growth increases 
D)  in the long run if money supply growth decreases 
A)  in the short run if money supply growth increased unexpectedly 
B)  in the short run if money supply growth decreased unexpectedly 
C)  in the long run if money supply growth increases 
D)  in the long run if money supply growth decreases

Question 12

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

Accepted Answer

A)  the shape of the long-run aggregate-supply curve 
B)  unanticipated inflation, not inflation per se 
C)  rational expectations 
D)  anticipated changes in the price level 
A)  the shape of the long-run aggregate-supply curve 
B)  unanticipated inflation, not inflation per se 
C)  rational expectations 
D)  anticipated changes in the price level

Question 13

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Accepted Answer

A)  0 
B)  2 
C)  4 
D)  6 
A)  0 
B)  2 
C)  4 
D)  6

Question 14

Which hypothesis is supported by the economic experience of Canada during the late 1960s and early 1970s?

Accepted Answer

A)  Inflation and unemployment are negatively correlated. 
B)  Inflation and unemployment are related in the short run. 
C)  Inflation and unemployment are related in the long run. 
D)  Inflation and unemployment are positively correlated. 
A)  Inflation and unemployment are negatively correlated. 
B)  Inflation and unemployment are related in the short run. 
C)  Inflation and unemployment are related in the long run. 
D)  Inflation and unemployment are positively correlated.

Question 15

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 16

If inflation expectations rise, how do the short-run Phillips curve and unemployment change?

Accepted Answer

A)  The short-run Phillips curve shifts right, so that at any inflation rate unemployment is higher. 
B)  The short-run Phillips curve shifts left, so that at any inflation rate unemployment is higher. 
C)  The short-run Phillips curve shifts right, so that at any inflation rate unemployment is lower. 
D)  The short-run Phillips curve shifts left, so that at any inflation rate unemployment is lower. 
A)  The short-run Phillips curve shifts right, so that at any inflation rate unemployment is higher. 
B)  The short-run Phillips curve shifts left, so that at any inflation rate unemployment is higher. 
C)  The short-run Phillips curve shifts right, so that at any inflation rate unemployment is lower. 
D)  The short-run Phillips curve shifts left, so that at any inflation rate unemployment is lower.

Question 17

Suppose the Bank of Canada decreased the growth rate of the money supply. What would permanently decrease?

Accepted Answer

A)  the unemployment level 
B)  the unemployment rate 
C)  the inflation rate 
D)  the price level 
A)  the unemployment level 
B)  the unemployment rate 
C)  the inflation rate 
D)  the price level

Question 18

If efficiency wages became more common, where would the long-run Phillips curve and the long-run aggregate-supply curve shift?

Accepted Answer

A)  Both the long-run Phillips curve and the long-run aggregate-supply curve would shift right. 
B)  Both the long-run Phillips curve and the long-run aggregate-supply curve would shift left. 
C)  The long-run Phillips curve would shift right, and the long-run aggregate-supply curve would shift left. 
D)  The long-run Phillips curve would shift left, and the long-run aggregate-supply curve would shift right. 
A)  Both the long-run Phillips curve and the long-run aggregate-supply curve would shift right. 
B)  Both the long-run Phillips curve and the long-run aggregate-supply curve would shift left. 
C)  The long-run Phillips curve would shift right, and the long-run aggregate-supply curve would shift left. 
D)  The long-run Phillips curve would shift left, and the long-run aggregate-supply curve would shift right.

Question 19

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 20

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 point in the short run?

Accepted Answer

A)  point b 
B)  point c 
C)  point d 
D)  point h 
A)  point b 
B)  point c 
C)  point d 
D)  point h

According to classical macroeconomic theory, what does money growth influence in the long run?

In the long run, the inflation rate depends primarily on money supply growth.

Which term refers to the short-run relationship between inflation and unemployment?

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, what are the values of unemployment and inflation?

Use the AD/AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

How will an adverse supply shock shift the short-run Phillips curve, and how will it change unemployment?

Suppose that a central bank increases the money supply. According to the Phillips curve, what should happen to prices, output, and employment?

The vertical long-run Phillips curve is an exception to monetary neutrality implied by the classical dichotomy.

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Figure 16-3 -Refer to the Figure 16-3. When would the economy move from c and 3 to e and 5?

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Which hypothesis is supported by the economic experience of Canada during the late 1960s and early 1970s?

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

If inflation expectations rise, how do the short-run Phillips curve and unemployment change?

Suppose the Bank of Canada decreased the growth rate of the money supply. What would permanently decrease?

If efficiency wages became more common, where would the long-run Phillips curve and the long-run aggregate-supply curve shift?

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?

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 point in the short run?

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

According to classical macroeconomic theory, what does money growth influence in the long run?

In the long run, the inflation rate depends primarily on money supply growth.

Which term refers to the short-run relationship between inflation and unemployment?

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, what are the values of unemployment and inflation?

Use the AD/AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

How will an adverse supply shock shift the short-run Phillips curve, and how will it change unemployment?

Suppose that a central bank increases the money supply. According to the Phillips curve, what should happen to prices, output, and employment?

The vertical long-run Phillips curve is an exception to monetary neutrality implied by the classical dichotomy.

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Figure 16-3 -Refer to the Figure 16-3. When would the economy move from c and 3 to e and 5?

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Which hypothesis is supported by the economic experience of Canada during the late 1960s and early 1970s?

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

If inflation expectations rise, how do the short-run Phillips curve and unemployment change?

Suppose the Bank of Canada decreased the growth rate of the money supply. What would permanently decrease?

If efficiency wages became more common, where would the long-run Phillips curve and the long-run aggregate-supply curve shift?

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?

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 point in the short run?

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