Question 1

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 2

Suppose an economy with high inflation decides to decrease the money supply growth rate. Which of the following best describes the results?

Accepted Answer

A) Initially unemployment rises. Eventually the short-run Phillips curve shifts right. 
B) Initially unemployment rises. Eventually the short-run Phillips curve shifts left. 
C) Initially unemployment falls. Eventually the short-run Phillips curve shifts right. 
D) Initially unemployment falls. Eventually the short-run Phillips curve shifts left. 
A) Initially unemployment rises. Eventually the short-run Phillips curve shifts right. 
B) Initially unemployment rises. Eventually the short-run Phillips curve shifts left. 
C) Initially unemployment falls. Eventually the short-run Phillips curve shifts right. 
D) Initially unemployment falls. Eventually the short-run Phillips curve shifts left.

Question 3

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 4

In the long run, if the Bank of Canada decreases the rate at which it increases the money supply, what will happen to inflation and unemployment?

Accepted Answer

A) Inflation and unemployment will be higher. 
B) Inflation will be higher and unemployment will be lower. 
C) Inflation will be lower and unemployment will be higher. 
D) Inflation will be lower and unemployment will stay the same. 
A) Inflation and unemployment will be higher. 
B) Inflation will be higher and unemployment will be lower. 
C) Inflation will be lower and unemployment will be higher. 
D) Inflation will be lower and unemployment will stay the same.

Question 5

How is the misery index calculated?

Accepted Answer

A) It is the inflation rate plus the unemployment rate. 
B) It is the unemployment rate minus the inflation rate. 
C) It is the actual inflation rate minus the expected inflation rate. 
D) It is the natural unemployment rate plus the long-run inflation rate. 
A) It is the inflation rate plus the unemployment rate. 
B) It is the unemployment rate minus the inflation rate. 
C) It is the actual inflation rate minus the expected inflation rate. 
D) It is the natural unemployment rate plus the long-run inflation rate.

Question 6

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 7

In the late 1960s, which of the following was published by economist Edmund Phelps?

Accepted Answer

A) a paper that argued that there was no long-run tradeoff between inflation and unemployment 
B) a paper that disproved Friedman's claim that monetary policy was ineffective in controlling inflation 
C) a paper that showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent 
D) a paper that argued that the Phillips curve was stable and that it would not shift 
A) a paper that argued that there was no long-run tradeoff between inflation and unemployment 
B) a paper that disproved Friedman's claim that monetary policy was ineffective in controlling inflation 
C) a paper that showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent 
D) a paper that argued that the Phillips curve was stable and that it would not shift

Question 8

Compared to the 1970s, how did the Canadian short-run Phillips curve move in recent years and why?

Accepted Answer

A) It has moved further right, as inflation expectations have risen. 
B) It has further right, as inflation expectations have fallen. 
C) It has further left, as inflation expectations have risen. 
D) It has further left, as inflation expectations have fallen. 
A) It has moved further right, as inflation expectations have risen. 
B) It has further right, as inflation expectations have fallen. 
C) It has further left, as inflation expectations have risen. 
D) It has further left, as inflation expectations have fallen.

Question 9

If there is an adverse supply shock, which of the following will most likely happen?

Accepted Answer

A) The aggregate supply curve and the short-run Phillips curve will both shift right. 
B) The aggregate supply curve and the short-run Phillips curve will both shift left. 
C) The aggregate supply curve will shift right, and the short-run Phillips curve will shift left. 
D) The aggregate supply curve will shift left, and the short-run Phillips curve will shift right. 
A) The aggregate supply curve and the short-run Phillips curve will both shift right. 
B) The aggregate supply curve and the short-run Phillips curve will both shift left. 
C) The aggregate supply curve will shift right, and the short-run Phillips curve will shift left. 
D) The aggregate supply curve will shift left, and the short-run Phillips curve will shift right.

Question 10

Which of the following curves is (are) downward sloping?

Accepted Answer

A) both the long-run and the short-run Phillips curve 
B) neither the long-run nor the short-run Phillips curve 
C) only the long-run Phillips curve 
D) only the short-run Phillips curve 
A) both the long-run and the short-run Phillips curve 
B) neither the long-run nor the short-run Phillips curve 
C) only the long-run Phillips curve 
D) only the short-run Phillips curve

Question 11

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

Accepted Answer

A) 0 
B) 2 
C) 3 
D) 4 
A) 0 
B) 2 
C) 3 
D) 4

Question 12

Friedman argued that a central bank could use monetary policy to peg which of the following?

Accepted Answer

A) the nominal exchange rate 
B) real GDP growth rate 
C) the unemployment rate 
D) the interest rate 
A) the nominal exchange rate 
B) real GDP growth rate 
C) the unemployment rate 
D) the interest rate

Question 13

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 14

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

Accepted Answer

A) both the natural rate of unemployment and the inflation rate 
B) the natural rate of unemployment, but not the inflation rate 
C) the inflation rate, but not the natural rate of unemployment 
D) neither the natural unemployment rate nor the inflation rate 
A) both the natural rate of unemployment and the inflation rate 
B) the natural rate of unemployment, but not the inflation rate 
C) the inflation rate, but not the natural rate of unemployment 
D) neither the natural unemployment rate nor the inflation rate

Question 15

How was the Phillips curve for most of the 1990s and why?

Accepted Answer

A) It was fairly far to the right partly because of lower inflation expectations. 
B) It was fairly far to the left partly because of lower inflation expectations. 
C) It was fairly far to the right partly because of adverse supply shocks. 
D) It was fairly far to the left partly because of adverse supply shocks. 
A) It was fairly far to the right partly because of lower inflation expectations. 
B) It was fairly far to the left partly because of lower inflation expectations. 
C) It was fairly far to the right partly because of adverse supply shocks. 
D) It was fairly far to the left partly because of adverse supply shocks.

Question 16

If the government raises government expenditures, what happens to prices and unemployment in the short run?

Accepted Answer

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

Question 17

Suppose the natural rate of unemployment is 4 percent. Then suppose that Parliament passes laws that make the labour market less flexible, so the natural rate of unemployment rises to 5 percent. If the sacrifice ratio is 3, how much higher must the inflation rate go in order to keep the unemployment rate at 4 percent in the long run?

Accepted Answer

A) 3 percent 
B) 12 percent 
C) 15 percent 
D) There is no inflation rate that will keep unemployment at 4 percent in the long run. 
A) 3 percent 
B) 12 percent 
C) 15 percent 
D) There is no inflation rate that will keep unemployment at 4 percent in the long run.

Question 18

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 19

Figure 16-4  
-Refer to 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 20

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Accepted Answer

The Phillips curve shows the relation be

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

Suppose an economy with high inflation decides to decrease the money supply growth rate. Which of the following best describes the results?

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

In the long run, if the Bank of Canada decreases the rate at which it increases the money supply, what will happen to inflation and unemployment?

How is the misery index calculated?

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

In the late 1960s, which of the following was published by economist Edmund Phelps?

Compared to the 1970s, how did the Canadian short-run Phillips curve move in recent years and why?

If there is an adverse supply shock, which of the following will most likely happen?

Which of the following curves is (are) downward sloping?

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

Friedman argued that a central bank could use monetary policy to peg which of the following?

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. Which of the following would permanently decrease?

How was the Phillips curve for most of the 1990s and why?

If the government raises government expenditures, what happens to prices and unemployment in the short run?

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

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

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

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

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

Suppose an economy with high inflation decides to decrease the money supply growth rate. Which of the following best describes the results?

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

In the long run, if the Bank of Canada decreases the rate at which it increases the money supply, what will happen to inflation and unemployment?

How is the misery index calculated?

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

In the late 1960s, which of the following was published by economist Edmund Phelps?

Compared to the 1970s, how did the Canadian short-run Phillips curve move in recent years and why?

If there is an adverse supply shock, which of the following will most likely happen?

Which of the following curves is (are) downward sloping?

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

Friedman argued that a central bank could use monetary policy to peg which of the following?

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. Which of the following would permanently decrease?

How was the Phillips curve for most of the 1990s and why?

If the government raises government expenditures, what happens to prices and unemployment in the short run?

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

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

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

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

Filters