Question 1

In the long run, a decrease in the money supply growth rate

Accepted Answer

A) shifts the short-run Phillips curve left so inflation returns to its original rate. 
B) shifts the short-run Phillips curve left so unemployment returns to its natural rate. 
C) Both A and B are correct. 
D) None of the above is correct. 
A) shifts the short-run Phillips curve left so inflation returns to its original rate. 
B) shifts the short-run Phillips curve left so unemployment returns to its natural rate. 
C) Both A and B are correct. 
D) None of the above is correct.

Question 2

Figure 22-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

Accepted Answer

A) B and 2. 
B) B and 3. 
C) B and 3 
D) None of the above is correct. 
A) B and 2. 
B) B and 3. 
C) B and 3 
D) None of the above is correct.

Question 3

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A) reduced both unemployment and inflation. 
B) reduced inflation significantly, but at the cost of a severe recession. 
C) reduced unemployment significantly, but at the cost of higher inflation. 
D) raised both unemployment and inflation. 
A) reduced both unemployment and inflation. 
B) reduced inflation significantly, but at the cost of a severe recession. 
C) reduced unemployment significantly, but at the cost of higher inflation. 
D) raised both unemployment and inflation.

Question 4

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A) both the inflation rate and the unemployment rate. 
B) the inflation rate but not the unemployment rate. 
C) the unemployment rate but not the inflation rate. 
D) neither the unemployment rate nor the inflation rate. 
A) both the inflation rate and the unemployment rate. 
B) the inflation rate but not the unemployment rate. 
C) the unemployment rate but not the inflation rate. 
D) neither the unemployment rate nor the inflation rate.

Question 5

Prime Minister Emma Bigshot urges passage of a bill to reduce unemployment benefits from very generous levels in her country. She also urges her country's central bank to raise the rate at which the money supply is increasing. In the long run which, if either, of these policies will reduce the unemployment rate?

Accepted Answer

A) both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing 
B) reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing 
C) raising the rate at which the money supply is increasing, but not reducing the generosity of unemployment benefits 
D) neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasing 
A) both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing 
B) reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing 
C) raising the rate at which the money supply is increasing, but not reducing the generosity of unemployment benefits 
D) neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasing

Question 6

Phillips found a negative relation between

Accepted Answer

A) output and unemployment. 
B) output and employment. 
C) wage inflation and unemployment. 
D) None of the above is correct. 
A) output and unemployment. 
B) output and employment. 
C) wage inflation and unemployment. 
D) None of the above is correct.

Question 7

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."  
-Refer to Figure 22-8. What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A) time 
B) the unemployment rate 
C) real GDP 
D) the growth rate of real GDP 
A) time 
B) the unemployment rate 
C) real GDP 
D) the growth rate of real GDP

Question 8

Figure 22-6
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 22-6. The economy would move from C to B

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 9

The short-run relationship between inflation and unemployment is often called

Accepted Answer

A) the Classical Dichotomy. 
B) Money Neutrality. 
C) the Phillips curve. 
D) None of the above is correct. 
A) the Classical Dichotomy. 
B) Money Neutrality. 
C) the Phillips curve. 
D) None of the above is correct.

Question 10

If policymakers decrease aggregate demand, then in the short run the price level

Accepted Answer

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

Question 11

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Accepted Answer

A) moving to the left along the short-run Phillips curve. 
B) moving to the right along the short-run Phillips curve. 
C) shifting the short-run Phillips curve to the right. 
D) shifting the short-run Phillips curve to the left. 
A) moving to the left along the short-run Phillips curve. 
B) moving to the right along the short-run Phillips curve. 
C) shifting the short-run Phillips curve to the right. 
D) shifting the short-run Phillips curve to the left.

Question 12

Natural rate of unemployment - a * ctual inflation - Expected inflation) =

Accepted Answer

A) Quantity of goods and services demanded. 
B) Quantity of goods and services supplied. 
C) Unemployment rate. 
D) Previous year's inflation rate. 
A) Quantity of goods and services demanded. 
B) Quantity of goods and services supplied. 
C) Unemployment rate. 
D) Previous year's inflation rate.

Question 13

Disinflation would eventually cause

Accepted Answer

A) the short-run and the long run Phillips curve to shift right. 
B) the short-run and the long run Phillips curve to shift left. 
C) the short-run Phillips curve but not the long run Phillips curve to shift right. 
D) the short-run Phillips curve but not the long run Phillips curve to shift left. 
A) the short-run and the long run Phillips curve to shift right. 
B) the short-run and the long run Phillips curve to shift left. 
C) the short-run Phillips curve but not the long run Phillips curve to shift right. 
D) the short-run Phillips curve but not the long run Phillips curve to shift left.

Question 14

A central bank that accommodates an aggregate supply shock

Accepted Answer

A) increases the money supply, making the inflation rate rise. 
B) increases the money supply, making the inflation rate fall. 
C) decreases the money supply, making the inflation rate rise. 
D) decreases the money supply, making the inflation rate fall. 
A) increases the money supply, making the inflation rate rise. 
B) increases the money supply, making the inflation rate fall. 
C) decreases the money supply, making the inflation rate rise. 
D) decreases the money supply, making the inflation rate fall.

Question 15

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A) right, so that at any unemployment rate inflation is higher in the short run than before. 
B) left, so that at any unemployment rate inflation is higher in the short run the before. 
C) right, so that at any unemployment rate inflation is lower in the short run than before. 
D) left, so that at any unemployment rate inflation is lower in the short run than before. 
A) right, so that at any unemployment rate inflation is higher in the short run than before. 
B) left, so that at any unemployment rate inflation is higher in the short run the before. 
C) right, so that at any unemployment rate inflation is lower in the short run than before. 
D) left, so that at any unemployment rate inflation is lower in the short run than before.

Question 16

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to The Economy in 2008. The short-run effects of rising world commodity prices are shown by

Accepted Answer

A) moving to the right along the short-run Phillips curve. 
B) moving to the left along the short-run Phillips curve. 
C) shifting the short-run Phillips curve right. 
D) shifting the short-run Phillips curve left. 
A) moving to the right along the short-run Phillips curve. 
B) moving to the left along the short-run Phillips curve. 
C) shifting the short-run Phillips curve right. 
D) shifting the short-run Phillips curve left.

Question 17

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 18

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Accepted Answer

A) the short-run and the long run Phillips curves 
B) the short-run but not the long run Phillips curve 
C) the long-run but not the short-run Phillips curve 
D) neither the short-run nor the long-run Phillips curves 
A) the short-run and the long run Phillips curves 
B) the short-run but not the long run Phillips curve 
C) the long-run but not the short-run Phillips curve 
D) neither the short-run nor the long-run Phillips curves

Question 19

Figure 22-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 22-1. The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Accepted Answer

A) that applies both in the short run and in the long run. 
B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. 
C) of inflation and unemployment. 
D) All of the above are correct. 
A) that applies both in the short run and in the long run. 
B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. 
C) of inflation and unemployment. 
D) All of the above are correct.

Question 20

According to classical macroeconomic theory, in the long run

Accepted Answer

A) monetary growth affects both real and nominal variables. 
B) the only real variable affected by monetary growth is the unemployment rate. 
C) a number of factors that affect unemployment are influenced by monetary growth. 
D) monetary growth affects nominal but not real variables. 
A) monetary growth affects both real and nominal variables. 
B) the only real variable affected by monetary growth is the unemployment rate. 
C) a number of factors that affect unemployment are influenced by monetary growth. 
D) monetary growth affects nominal but not real variables.

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

In the long run, a decrease in the money supply growth rate

Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

The restrictive monetary policy followed by the Fed in the early 1980s

According to the long-run Phillips curve, in the long run monetary policy influences

Phillips found a negative relation between

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. What is measured along the horizontal axis of the right-hand graph?

Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6. The economy would move from C to B

The short-run relationship between inflation and unemployment is often called

If policymakers decrease aggregate demand, then in the short run the price level

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Natural rate of unemployment - a * ctual inflation - Expected inflation) =

Disinflation would eventually cause

A central bank that accommodates an aggregate supply shock

If inflation expectations rise, the short-run Phillips curve shifts

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008. The short-run effects of rising world commodity prices are shown by

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

According to classical macroeconomic theory, in the long run

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

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