Question 1

If the Fed were to announce that fighting inflation is not a high priority for the immediate future ________.

Accepted Answer

A) households might expect higher inflation 
B) the short run aggregate supply would shift upwards 
C) firms might begin raising their prices to keep up with expected inflation 
D) all of the above 
E) none of the above 
A) households might expect higher inflation 
B) the short run aggregate supply would shift upwards 
C) firms might begin raising their prices to keep up with expected inflation 
D) all of the above 
E) none of the above

Question 2

Technological advances lead to ________.

Accepted Answer

A) a shift of the short run AS curve up 
B) a shift of the long run AS curve to the left 
C) an upward movement along the long run AS curve 
D) all of the above 
E) none of the above 
A) a shift of the short run AS curve up 
B) a shift of the long run AS curve to the left 
C) an upward movement along the long run AS curve 
D) all of the above 
E) none of the above

Question 3

Which of the following shows a negative relationship between the output and unemployment gaps?

Accepted Answer

A) the AS curve 
B) the Phillips curve 
C) Okun's law 
D) the classical dichotomy 
E) none of the above 
A) the AS curve 
B) the Phillips curve 
C) Okun's law 
D) the classical dichotomy 
E) none of the above

Question 4

Suppose the government lowers unemployment by hiring more government workers.How does it matter whether wages and prices are sticky?

Accepted Answer

As long as wages and prices are sticky,t

Question 5

An example of a price shock is ________.

Accepted Answer

A) an increase in wages as a result of higher expected inflation 
B) the arrival of immigrants seeking employment 
C) the decline in autonomous spending that results from rising unemployment 
D) all of the above 
E) none of the above 
A) an increase in wages as a result of higher expected inflation 
B) the arrival of immigrants seeking employment 
C) the decline in autonomous spending that results from rising unemployment 
D) all of the above 
E) none of the above

Question 6

The idea behind the Phillips curve is that ________.

Accepted Answer

A) tightness in the labor market puts downward pressures on wages and prices 
B) when the unemployment rate is low wages will increase 
C) when firms raise wages to attract new workers,prices decrease 
D) all of the above 
E) none of the above 
A) tightness in the labor market puts downward pressures on wages and prices 
B) when the unemployment rate is low wages will increase 
C) when firms raise wages to attract new workers,prices decrease 
D) all of the above 
E) none of the above

Question 7

As wages and prices become more sticky ________.

Accepted Answer

A) inflation becomes more responsive to unemployment deviations from the natural rate 
B) wages become less responsive to unemployment deviations from the natural rate 
C) it becomes more difficult to differentiate the short-run from the long-run Phillips curve 
D) all of the above 
E) none of the above 
A) inflation becomes more responsive to unemployment deviations from the natural rate 
B) wages become less responsive to unemployment deviations from the natural rate 
C) it becomes more difficult to differentiate the short-run from the long-run Phillips curve 
D) all of the above 
E) none of the above

Question 8

In the 1960s,the Phillips curve was ________.

Accepted Answer

A) consistent with a positive relationship between inflation and unemployment 
B) suggestive of a temporary trade off between inflation and unemployment 
C) a very popular explanation for inflation fluctuations 
D) all of the above 
E) none of the above 
A) consistent with a positive relationship between inflation and unemployment 
B) suggestive of a temporary trade off between inflation and unemployment 
C) a very popular explanation for inflation fluctuations 
D) all of the above 
E) none of the above

Question 9

A.W.Phillips' 1958 paper examined unemployment and wage growth.What role,if any,does wage growth play in the modern Phillips curve?

Accepted Answer

The modern Phillips curve relates unempl

Question 10

If wages and prices become extremely flexible ________.

Accepted Answer

A) there is no trade off between inflation and unemployment 
B) unemployment can hardly deviate from the natural rate 
C) it becomes very difficult to differentiate the short-run from the long-run Phillips curve 
D) all of the above 
E) none of the above 
A) there is no trade off between inflation and unemployment 
B) unemployment can hardly deviate from the natural rate 
C) it becomes very difficult to differentiate the short-run from the long-run Phillips curve 
D) all of the above 
E) none of the above

Question 11

Milton Friedman and Edmund Phelps contributed which insight(s)to Phillips curve analysis?

Accepted Answer

A) that firms and workers care about real wages 
B) that inflation and expected inflation influence each other 
C) that,in the long run,the level of unemployment is independent of inflation 
D) all of the above 
E) none of the above 
A) that firms and workers care about real wages 
B) that inflation and expected inflation influence each other 
C) that,in the long run,the level of unemployment is independent of inflation 
D) all of the above 
E) none of the above

Question 12

Based on the data in this table,  
If the natural rate of unemployment is steady at 8 percent,what is the inflation rate in period 3?

Accepted Answer

A) 8.5 percent 
B) 7.5 percent 
C) 5.5 percent 
D) 6.3 percent 
E) none of the above 
A) 8.5 percent 
B) 7.5 percent 
C) 5.5 percent 
D) 6.3 percent 
E) none of the above

Question 13

The Long-Run Phillips Curve is vertical,suggesting that ________.

Accepted Answer

A) allowing inflation to rise will not succeed in keeping unemployment low 
B) changes in unemployment have no lasting impact on inflation 
C) shifts of the short-run Phillips curve impact inflation,but have no effect on unemployment 
D) all of the above 
E) none of the above 
A) allowing inflation to rise will not succeed in keeping unemployment low 
B) changes in unemployment have no lasting impact on inflation 
C) shifts of the short-run Phillips curve impact inflation,but have no effect on unemployment 
D) all of the above 
E) none of the above

Question 14

If the natural rate of unemployment declines ________.

Accepted Answer

A) labor is more heavily utilized 
B) potential output increases 
C) the long run aggregate supply curve shifts to the right 
D) all of the above 
E) none of the above 
A) labor is more heavily utilized 
B) potential output increases 
C) the long run aggregate supply curve shifts to the right 
D) all of the above 
E) none of the above

Question 15

If Okun's law is U -  
= - 0.5 (Y -  
),and potential output grows at 2% per year,then a recession that causes output to decrease by one percentage point will cause unemployment to increase by ________.

Accepted Answer

A) 1 percentage point 
B) 1.5 percentage points 
C) 2 percentage points 
D) 3 percentage points 
E) one-half percentage point 
A) 1 percentage point 
B) 1.5 percentage points 
C) 2 percentage points 
D) 3 percentage points 
E) one-half percentage point

Question 16

Aggregate Supply Curves (1)  
-Based on the graph above,if the economy is at point 2,then (assuming no price shocks and no changes in actual and potential output)the inflation rate next period will be ________ percent.

Accepted Answer

A) 5 
B) 3.5 
C) 4.5 
D) 4 
E) none of the above 
A) 5 
B) 3.5 
C) 4.5 
D) 4 
E) none of the above

Question 17

In the short run ________.

Accepted Answer

A) the more flexible wages and prices are,the more inflation responds to the output gap 
B) the more sticky wages and prices are,the more difficult to tell the difference between the short run and long run aggregate supply curves 
C) if wages and prices are sticky,aggregate output is always at its potential level 
D) all of the above 
E) none of the above 
A) the more flexible wages and prices are,the more inflation responds to the output gap 
B) the more sticky wages and prices are,the more difficult to tell the difference between the short run and long run aggregate supply curves 
C) if wages and prices are sticky,aggregate output is always at its potential level 
D) all of the above 
E) none of the above

Question 18

If the short-run aggregate supply curve is π =  
+ 1.2 (Y -  
)+ ρ,output equals potential output and there is a price shock of minus two,then the inflation rate is ________.

Accepted Answer

A) 2 
B)   
- 2 
C) minus 2 
D) minus 2.4 
E) none of the above 
A) 2 
B)   
- 2 
C) minus 2 
D) minus 2.4 
E) none of the above

Question 19

Aggregate Supply Curves (1)  
-Based on the graph above,suppose the economy is at point 2,then output falls to 10 and there is a price shock of one percent.The inflation rate next period will be ________ percent.

Accepted Answer

A) 5 
B) 3.5 
C) 4.5 
D) 4 
E) none of the above 
A) 5 
B) 3.5 
C) 4.5 
D) 4 
E) none of the above

Question 20

What can be concluded from Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve?

Accepted Answer

A) that there is a long run tradeoff between unemployment and inflation 
B) that there is a short run tradeoff between unemployment and inflation 
C) that inflation is positively related to the unemployment gap 
D) all of the above 
E) none of the above 
A) that there is a long run tradeoff between unemployment and inflation 
B) that there is a short run tradeoff between unemployment and inflation 
C) that inflation is positively related to the unemployment gap 
D) all of the above 
E) none of the above

Exam 11: Aggregate Supply and the Phillips Curve

If the Fed were to announce that fighting inflation is not a high priority for the immediate future ________.

Technological advances lead to ________.

Which of the following shows a negative relationship between the output and unemployment gaps?

Suppose the government lowers unemployment by hiring more government workers.How does it matter whether wages and prices are sticky?

An example of a price shock is ________.

The idea behind the Phillips curve is that ________.

As wages and prices become more sticky ________.

In the 1960s,the Phillips curve was ________.

A.W.Phillips' 1958 paper examined unemployment and wage growth.What role,if any,does wage growth play in the modern Phillips curve?

If wages and prices become extremely flexible ________.

Milton Friedman and Edmund Phelps contributed which insight(s)to Phillips curve analysis?

Based on the data in this table, If the natural rate of unemployment is steady at 8 percent,what is the inflation rate in period 3?

The Long-Run Phillips Curve is vertical,suggesting that ________.

If the natural rate of unemployment declines ________.

If Okun's law is U - = - 0.5 (Y - ),and potential output grows at 2% per year,then a recession that causes output to decrease by one percentage point will cause unemployment to increase by ________.

Aggregate Supply Curves (1) -Based on the graph above,if the economy is at point 2,then (assuming no price shocks and no changes in actual and potential output)the inflation rate next period will be ________ percent.

In the short run ________.

If the short-run aggregate supply curve is π = + 1.2 (Y - )+ ρ,output equals potential output and there is a price shock of minus two,then the inflation rate is ________.

Aggregate Supply Curves (1) -Based on the graph above,suppose the economy is at point 2,then output falls to 10 and there is a price shock of one percent.The inflation rate next period will be ________ percent.

What can be concluded from Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve?

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters