Question 1

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 2

Scenario 2
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.
-Referring to Scenario 2, draw the long-run and short-run Phillips curves. What is the inflation rate corresponding to the intersection of the two curves?

Accepted Answer

The short-run Phillips curve is describe

Question 3

Figure 16-1  
-Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in the money supply growth rate moves the economy to where?

Accepted Answer

A) e and 1 
B) d and 2 
C) d and 3 
D) back to c and 1 
A) e and 1 
B) d and 2 
C) d and 3 
D) back to c and 1

Question 4

Which of the following best defines the sacrifice ratio?

Accepted Answer

A) the sum of the inflation and unemployment rates 
B) the inflation rate divided by the unemployment rate 
C) the number of percentage points annual output falls for each percentage point reduction in inflation 
D) the number of percentage points unemployment rises for each percentage point reduction in inflation 
A) the sum of the inflation and unemployment rates 
B) the inflation rate divided by the unemployment rate 
C) the number of percentage points annual output falls for each percentage point reduction in inflation 
D) the number of percentage points unemployment rises for each percentage point reduction in inflation

Question 5

Scenario 1
The aggregate demand (AD) and aggregate supply (AS) model can be constructed having inflation rate on the vertical axis instead of the price level and the rate of economic growth instead of output.
-Referring to Scenario 1, discuss the advantages and disadvantages of this representation of the AD-AS model.

Accepted Answer

The AD-AS model in terms of @#LAT-DLM&and g is mor

Question 6

Friedman and Phelps believed that the natural rate of unemployment was constant.

Accepted Answer

A) True 
 B)False

Question 7

According to Samuelson and Solow, when aggregate demand is high, how are unemployment, wages, and prices affected?

Accepted Answer

A) Unemployment is low, so there is upward pressure on wages and prices. 
B) Unemployment is low, so there is downward pressure on wages and prices. 
C) Unemployment is high, so there is upward pressure on wages and prices. 
D) Unemployment is high, so there is downward pressure on wages and prices. 
A) Unemployment is low, so there is upward pressure on wages and prices. 
B) Unemployment is low, so there is downward pressure on wages and prices. 
C) Unemployment is high, so there is upward pressure on wages and prices. 
D) Unemployment is high, so there is downward pressure on wages and prices.

Question 8

In the Friedman-Phelps analysis, when inflation is less than expected, unemployment is greater than the natural rate.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following equations summarize the analysis of Friedman and Phelps (where a is positive number)?

Accepted Answer

A) unemployment rate = natural rate of unemployment - a(actual inflation - expected inflation) 
B) unemployment rate = natural rate of unemployment - a(expected inflation - actual inflation) 
C) unemployment rate = expected rate of inflation - a(actual inflation - expected inflation) 
D) unemployment rate = actual rate of inflation - a(actual unemployment - expected unemployment) 
A) unemployment rate = natural rate of unemployment - a(actual inflation - expected inflation) 
B) unemployment rate = natural rate of unemployment - a(expected inflation - actual inflation) 
C) unemployment rate = expected rate of inflation - a(actual inflation - expected inflation) 
D) unemployment rate = actual rate of inflation - a(actual unemployment - expected unemployment)

Question 10

According to Friedman and Phelps, no matter what a central bank does to the money supply, which of the following will happen in the long run?

Accepted Answer

A) The economy will have a zero inflation rate. 
B) The unemployment rate will tend toward the natural rate of unemployment. 
C) The inflation rate will tend to the natural rate of inflation. 
D) The economy will have a zero unemployment rate. 
A) The economy will have a zero inflation rate. 
B) The unemployment rate will tend toward the natural rate of unemployment. 
C) The inflation rate will tend to the natural rate of inflation. 
D) The economy will have a zero unemployment rate.

Question 11

Figure 16-1  
-Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in taxes moves the economy to where?

Accepted Answer

A) d and 2 
B) d and 3 
C) back to c and 1 
D) c and 2 
A) d and 2 
B) d and 3 
C) back to c and 1 
D) c and 2

Question 12

Figure 16-1  
-Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in aggregate demand moves the economy to where?

Accepted Answer

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

Question 13

Is there a tradeoff between inflation and unemployment?

Accepted Answer

A) yes, in the short-run only 
B) no, neither in the short run nor in the long run 
C) yes, in the long run only 
D) yes, both in the short run and in the long run 
A) yes, in the short-run only 
B) no, neither in the short run nor in the long run 
C) yes, in the long run only 
D) yes, both in the short run and in the long run

Question 14

Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output. What is this country's sacrifice ratio?

Accepted Answer

A) 3 
B) 3.5 
C) 4 
D) 12 
A) 3 
B) 3.5 
C) 4 
D) 12

Question 15

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

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 18

Who releases the closely watched indicators such as the inflation rate and unemployment each month?

Accepted Answer

A) the Bureau of the Budget 
B) the Ministry of Finance 
C) the Department of the Treasury 
D) Statistics Canada 
A) the Bureau of the Budget 
B) the Ministry of Finance 
C) the Department of the Treasury 
D) Statistics Canada

Question 19

Figure 16-4  
-Refer to Figure 16-4. Along SRPC3, what is the expected rate of inflation?

Accepted Answer

A) 0 percent 
B) 2 percent 
C) 3 percent 
D) 5 percent 
A) 0 percent 
B) 2 percent 
C) 3 percent 
D) 5 percent

Question 20

Figure 16-2  
-Refer to Figure 16-2. What is curve 1?

Accepted Answer

A) the long-run aggregate supply curve 
B) the short-run aggregate supply curve 
C) the long-run Phillips curve 
D) the short-run Phillips curve 
A) the long-run aggregate supply curve 
B) the short-run aggregate supply curve 
C) the long-run Phillips curve 
D) the short-run Phillips curve

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

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in the money supply growth rate moves the economy to where?

Which of the following best defines the sacrifice ratio?

Friedman and Phelps believed that the natural rate of unemployment was constant.

According to Samuelson and Solow, when aggregate demand is high, how are unemployment, wages, and prices affected?

In the Friedman-Phelps analysis, when inflation is less than expected, unemployment is greater than the natural rate.

Which of the following equations summarize the analysis of Friedman and Phelps (where a is positive number)?

According to Friedman and Phelps, no matter what a central bank does to the money supply, which of the following will happen in the long run?

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in taxes moves the economy to where?

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in aggregate demand moves the economy to where?

Is there a tradeoff between inflation and unemployment?

Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output. What is this country's sacrifice ratio?

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

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

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

Who releases the closely watched indicators such as the inflation rate and unemployment each month?

Figure 16-4 -Refer to Figure 16-4. Along SRPC3, what is the expected rate of inflation?

Figure 16-2 -Refer to Figure 16-2. What is curve 1?

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 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

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

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in the money supply growth rate moves the economy to where?

Which of the following best defines the sacrifice ratio?

Friedman and Phelps believed that the natural rate of unemployment was constant.

According to Samuelson and Solow, when aggregate demand is high, how are unemployment, wages, and prices affected?

In the Friedman-Phelps analysis, when inflation is less than expected, unemployment is greater than the natural rate.

Which of the following equations summarize the analysis of Friedman and Phelps (where a is positive number)?

According to Friedman and Phelps, no matter what a central bank does to the money supply, which of the following will happen in the long run?

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in taxes moves the economy to where?

Figure 16-1 -Refer to Figure 16-1. If the economy starts at c and 1, then in the short run, a decrease in aggregate demand moves the economy to where?

Is there a tradeoff between inflation and unemployment?

Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output. What is this country's sacrifice ratio?

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

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

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

Who releases the closely watched indicators such as the inflation rate and unemployment each month?

Figure 16-4 -Refer to Figure 16-4. Along SRPC3, what is the expected rate of inflation?

Figure 16-2 -Refer to Figure 16-2. What is curve 1?

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 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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