Question 1

A credible announced inflation reduction results in ________ natural unemployment rate and ________ shift in the short-run Phillips curve.

Accepted Answer

A)  a higher; an upward 
B)  a lower; an upward 
C)  no change in the; an upward 
D)  no change in the; a downward 
E)  no change in the; no 
A)  a higher; an upward 
B)  a lower; an upward 
C)  no change in the; an upward 
D)  no change in the; a downward 
E)  no change in the; no D

Question 2

The short-run Phillips curve illustrates ________ relationship between the unemployment rate and the inflation rate.

Accepted Answer

A)  a positive 
B)  a negative 
C)  a mixed 
D)  no 
E)  an upside-down U-shaped 
A)  a positive 
B)  a negative 
C)  a mixed 
D)  no 
E)  an upside-down U-shaped B

Question 3

On the long-run Phillips curve, the unemployment rate

Accepted Answer

A)  and inflation rate can take any value. 
B)  can be any value but the inflation rate equals the expected inflation rate. 
C)  equals the natural unemployment rate but the inflation rate can be any value. 
D)  equals the natural unemployment rate and the inflation rate equals the expected inflation rate. 
E)  decreases when the inflation rate increases. 
A)  and inflation rate can take any value. 
B)  can be any value but the inflation rate equals the expected inflation rate. 
C)  equals the natural unemployment rate but the inflation rate can be any value. 
D)  equals the natural unemployment rate and the inflation rate equals the expected inflation rate. 
E)  decreases when the inflation rate increases. C

Question 4

The natural unemployment rate and the expected inflation rate are constant when moving along the _______, which shows a trade off between ________ and ________.

Accepted Answer

A)  short-run Phillips curve; inflation; unemployment 
B)  aggregate demand curve; inflation; employment 
C)  aggregate supply curve; inflation; unemployment 
D)  long-run Phillips curve; inflation; unemployment 
E)  short-run Phillips curve; inflation; employment 
A)  short-run Phillips curve; inflation; unemployment 
B)  aggregate demand curve; inflation; employment 
C)  aggregate supply curve; inflation; unemployment 
D)  long-run Phillips curve; inflation; unemployment 
E)  short-run Phillips curve; inflation; employment

Question 5

The long-run Phillips curve is a vertical line because

Accepted Answer

A)  the unemployment rate decreases when the inflation rate increases. 
B)  there is no relationship between the natural unemployment rate and the inflation rate. 
C)  the natural unemployment rate only depends on the inflation rate. 
D)  real GDP does not depend on the unemployment rate. 
E)  in the long run, the natural unemployment rate increases when inflation increases. 
A)  the unemployment rate decreases when the inflation rate increases. 
B)  there is no relationship between the natural unemployment rate and the inflation rate. 
C)  the natural unemployment rate only depends on the inflation rate. 
D)  real GDP does not depend on the unemployment rate. 
E)  in the long run, the natural unemployment rate increases when inflation increases.

Question 6

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Price level } \
( 2005 = 100 )
\end{array} & \begin{array} { c } 
\text { Unemployment rate } \
\text { (percentage) }
\end{array} \
\hline 102 & 7 \
103 & 6 \
105 & 5 \
108 & 4 \
112 & 3 \
\hline
\end{array}$$
-Based on the above table, if the current price level is 100 and the unemployment rate is 4 percent, then the

Accepted Answer

A)  inflation rate is 8 percent. 
B)  expected inflation rate is 8 percent. 
C)  inflation rate is 2.8 percent. 
D)  expected inflation rate is 2.8 percent. 
E)  inflation rate is 108 percent. 
A)  inflation rate is 8 percent. 
B)  expected inflation rate is 8 percent. 
C)  inflation rate is 2.8 percent. 
D)  expected inflation rate is 2.8 percent. 
E)  inflation rate is 108 percent.

Question 7

If the economy moves upward along its short-run Phillips curve, in the AS-AD diagram, this movement is shown by a

Accepted Answer

A)  movement upward along the AS curve as a result of a rightward shift of the AD curve. 
B)  rightward shift of potential GDP. 
C)  movement downward along the AS curve as a result of a leftward shift of the AD curve. 
D)  rightward shift of the AS curve and a movement along the AD curve. 
E)  leftward shift of the AS curve and a movement along the AD curve. 
A)  movement upward along the AS curve as a result of a rightward shift of the AD curve. 
B)  rightward shift of potential GDP. 
C)  movement downward along the AS curve as a result of a leftward shift of the AD curve. 
D)  rightward shift of the AS curve and a movement along the AD curve. 
E)  leftward shift of the AS curve and a movement along the AD curve.

Question 8

What is Okun's Law?

Accepted Answer

Okun's Law says that for each

Question 9

A surprise reduction of inflation will come at the expense of

Accepted Answer

A)  a higher expected inflation rate. 
B)  an increase in real GDP. 
C)  a recession. 
D)  a decrease in the natural unemployment rate. 
E)  a downward shift in the short-run Phillips curve. 
A)  a higher expected inflation rate. 
B)  an increase in real GDP. 
C)  a recession. 
D)  a decrease in the natural unemployment rate. 
E)  a downward shift in the short-run Phillips curve.

Question 10

According to ________, when real GDP is ________ percentage points greater than potential GDP, the unemployment rate is one percentage point ________ the natural unemployment rate.

Accepted Answer

A)  Keynes' Law; two; below 
B)  Okun's Law; two; below 
C)  Phillip's Law; four; above 
D)  Say's Law; two; above 
E)  Okun's Law; four; below 
A)  Keynes' Law; two; below 
B)  Okun's Law; two; below 
C)  Phillip's Law; four; above 
D)  Say's Law; two; above 
E)  Okun's Law; four; below

Question 11

Moving ________ the short-run Phillips curve is equivalent to moving ________.

Accepted Answer

A)  downward along; downward along the aggregate demand curve 
B)  downward along; upward along the aggregate demand curve 
C)  upward along; upward along the aggregate supply curve 
D)  downward along; upward along the potential GDP line 
E)  downward along; downward along the potential GDP line 
A)  downward along; downward along the aggregate demand curve 
B)  downward along; upward along the aggregate demand curve 
C)  upward along; upward along the aggregate supply curve 
D)  downward along; upward along the potential GDP line 
E)  downward along; downward along the potential GDP line

Question 12

-The long-run Phillips curve is

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
E)  upside-down U-shaped 
A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
E)  upside-down U-shaped

Question 13

The long-run Phillips curve is graphed as a

Accepted Answer

A)  horizontal line at the expected level of inflation. 
B)  vertical line at the natural unemployment rate. 
C)  curve that slopes downward to the right. 
D)  curve that slopes upward to the right. 
E)  a straight line with a 45 degree slope. 
A)  horizontal line at the expected level of inflation. 
B)  vertical line at the natural unemployment rate. 
C)  curve that slopes downward to the right. 
D)  curve that slopes upward to the right. 
E)  a straight line with a 45 degree slope.

Question 14

A country reports that its inflation rate and unemployment rate have both increased.These changes could be the result of

Accepted Answer

A)  a movement upward along the short-run Phillips curve. 
B)  a movement downward along the short-run Phillips curve. 
C)  an upward shift of the short-run Phillips curve. 
D)  a downward shift of the short-run Phillips curve. 
E)  a leftward shift of the long-run Phillips curve. 
A)  a movement upward along the short-run Phillips curve. 
B)  a movement downward along the short-run Phillips curve. 
C)  an upward shift of the short-run Phillips curve. 
D)  a downward shift of the short-run Phillips curve. 
E)  a leftward shift of the long-run Phillips curve.

Question 15

"As the economy moves upward along its aggregate supply curve, the economy also moves upward along its short-run Phillips curve." Is the previous statement correct or incorrect?
 Briefly explain your answer.

Accepted Answer

The statement is correct.As the economy

Question 16

Using the Phillips curve framework, discuss how a credible announced decrease in the growth of aggregate demand affects inflation and unemployment.

Accepted Answer

If the reduction in inflation is fully e

Question 17

In 1981 Fed policy created a severe recession because the Fed

Accepted Answer

A)  increased aggregate supply to reduce the inflation rate. 
B)  undertook a surprise reduction in the inflation rate. 
C)  announced a credible inflation reduction program. 
D)  undertook a surprise increase in the inflation rate. 
E)  announced a credible inflation increase program. 
A)  increased aggregate supply to reduce the inflation rate. 
B)  undertook a surprise reduction in the inflation rate. 
C)  announced a credible inflation reduction program. 
D)  undertook a surprise increase in the inflation rate. 
E)  announced a credible inflation increase program.

Question 18

During early 2001, the Fed unexpectedly increased the money supply.The effect of this policy was a

Accepted Answer

A)  movement downward along the short-run Phillips curve. 
B)  movement upward along the short-run Phillips curve. 
C)  upward shift of the short-run Phillips curve. 
D)  downward shift of the short-run Phillips curve. 
E)  rightward shift of the long-run Phillips curve. 
A)  movement downward along the short-run Phillips curve. 
B)  movement upward along the short-run Phillips curve. 
C)  upward shift of the short-run Phillips curve. 
D)  downward shift of the short-run Phillips curve. 
E)  rightward shift of the long-run Phillips curve.

Question 19

When a movement up along the aggregate supply curve occurs, there is also

Accepted Answer

A)  a movement down along the short-run Phillips curve. 
B)  a movement up along the short-run Phillips curve. 
C)  a rightward shift of the short-run Phillips curve. 
D)  a leftward shift of the short-run Phillips curve. 
E)  no movement along nor a shift in the short-run Phillips curve. 
A)  a movement down along the short-run Phillips curve. 
B)  a movement up along the short-run Phillips curve. 
C)  a rightward shift of the short-run Phillips curve. 
D)  a leftward shift of the short-run Phillips curve. 
E)  no movement along nor a shift in the short-run Phillips curve.

Question 20

When the aggregate demand curve shifts,

Accepted Answer

A)  the short-run Phillips curve shifts. 
B)  there is a movement along the short-run Phillips curve. 
C)  there is a change in potential GDP. 
D)  there is a change in the natural unemployment rate. 
E)  the inflation rate does not change. 
A)  the short-run Phillips curve shifts. 
B)  there is a movement along the short-run Phillips curve. 
C)  there is a change in potential GDP. 
D)  there is a change in the natural unemployment rate. 
E)  the inflation rate does not change.

A credible announced inflation reduction results in natural unemployment rate and shift in the short-run Phillips curve.

The short-run Phillips curve illustrates ________ relationship between the unemployment rate and the inflation rate.

On the long-run Phillips curve, the unemployment rate

The natural unemployment rate and the expected inflation rate are constant when moving along the _, which shows a trade off between and __.

The long-run Phillips curve is a vertical line because

Price level (2005=100) Unemployment rate (percentage) 102 7 103 6 105 5 108 4 112 3 -Based on the above table, if the current price level is 100 and the unemployment rate is 4 percent, then the

If the economy moves upward along its short-run Phillips curve, in the AS-AD diagram, this movement is shown by a

What is Okun's Law?

A surprise reduction of inflation will come at the expense of

According to , when real GDP is percentage points greater than potential GDP, the unemployment rate is one percentage point the natural unemployment rate.

Moving the short-run Phillips curve is equivalent to moving .

-The long-run Phillips curve is

The long-run Phillips curve is graphed as a

A country reports that its inflation rate and unemployment rate have both increased.These changes could be the result of

"As the economy moves upward along its aggregate supply curve, the economy also moves upward along its short-run Phillips curve." Is the previous statement correct or incorrect? Briefly explain your answer.

Using the Phillips curve framework, discuss how a credible announced decrease in the growth of aggregate demand affects inflation and unemployment.

In 1981 Fed policy created a severe recession because the Fed

During early 2001, the Fed unexpectedly increased the money supply.The effect of this policy was a

When a movement up along the aggregate supply curve occurs, there is also

When the aggregate demand curve shifts,

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 15: The Short-Run Policy Tradeoff

A credible announced inflation reduction results in ________ natural unemployment rate and ________ shift in the short-run Phillips curve.

The short-run Phillips curve illustrates ________ relationship between the unemployment rate and the inflation rate.

On the long-run Phillips curve, the unemployment rate

The natural unemployment rate and the expected inflation rate are constant when moving along the _______, which shows a trade off between ________ and ________.

The long-run Phillips curve is a vertical line because

Price level (2005=100) Unemployment rate (percentage) 102 7 103 6 105 5 108 4 112 3 -Based on the above table, if the current price level is 100 and the unemployment rate is 4 percent, then the

If the economy moves upward along its short-run Phillips curve, in the AS-AD diagram, this movement is shown by a

What is Okun's Law?

A surprise reduction of inflation will come at the expense of

According to ________, when real GDP is ________ percentage points greater than potential GDP, the unemployment rate is one percentage point ________ the natural unemployment rate.

Moving ________ the short-run Phillips curve is equivalent to moving ________.

-The long-run Phillips curve is

The long-run Phillips curve is graphed as a

A country reports that its inflation rate and unemployment rate have both increased.These changes could be the result of

"As the economy moves upward along its aggregate supply curve, the economy also moves upward along its short-run Phillips curve." Is the previous statement correct or incorrect? Briefly explain your answer.

Using the Phillips curve framework, discuss how a credible announced decrease in the growth of aggregate demand affects inflation and unemployment.

In 1981 Fed policy created a severe recession because the Fed

During early 2001, the Fed unexpectedly increased the money supply.The effect of this policy was a

When a movement up along the aggregate supply curve occurs, there is also

When the aggregate demand curve shifts,

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

A credible announced inflation reduction results in natural unemployment rate and shift in the short-run Phillips curve.

The natural unemployment rate and the expected inflation rate are constant when moving along the _, which shows a trade off between and __.

According to , when real GDP is percentage points greater than potential GDP, the unemployment rate is one percentage point the natural unemployment rate.

Moving the short-run Phillips curve is equivalent to moving .