Question 1

In the short run ________.

Accepted Answer

A) inflation is negatively related to the output gap 
B) if output rises above its potential level,the unemployment rate falls and firms will lower wages 
C) if the labor market tightens,firms will raise prices more rapidly to keep up with upward wage pressures and inflation will ensue 
D) all of the above 
E) none of the above 
A) inflation is negatively related to the output gap 
B) if output rises above its potential level,the unemployment rate falls and firms will lower wages 
C) if the labor market tightens,firms will raise prices more rapidly to keep up with upward wage pressures and inflation will ensue 
D) all of the above 
E) none of the above

Question 2

Given the accelerationist Phillips curve Δπ = - 0.7 (U - 5)+ ρ,suppose that inflation has increased from 8 percent to 10 percent.If the unemployment rate is 4 percent,then the price shock is ________.

Accepted Answer

A) 2.7 percent 
B) 0.6 percent 
C) 1.3 percent 
D) 1 percent 
E) none of the above 
A) 2.7 percent 
B) 0.6 percent 
C) 1.3 percent 
D) 1 percent 
E) none of the above

Question 3

In the short run,if current output remains persistently above potential ________.

Accepted Answer

A) inflation will rise causing a movement along the aggregate supply curve 
B) expected inflation will rise causing an upward shift of the aggregate supply curve 
C) the aggregate supply curve will shift until current output returns to its potential level 
D) all of the above 
E) none of the above 
A) inflation will rise causing a movement along the aggregate supply curve 
B) expected inflation will rise causing an upward shift of the aggregate supply curve 
C) the aggregate supply curve will shift until current output returns to its potential level 
D) all of the above 
E) none of the above

Question 4

Why is there no long-run trade-off between unemployment and inflation?

Accepted Answer

Because when the labor market is so tigh

Question 5

The short-run aggregate supply curve shows that a change in inflation will cause (a)change(s)in ________.

Accepted Answer

A) output 
B) potential output 
C) expected inflation 
D) price shocks 
E) all of the above 
A) output 
B) potential output 
C) expected inflation 
D) price shocks 
E) all of the above

Question 6

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

Accepted Answer

A) that inflation is directly related to expectations of future inflation 
B) that inflation is negatively related to the unemployment gap 
C) that in the long run unemployment will be at the natural rate 
D) all of the above 
E) none of the above 
A) that inflation is directly related to expectations of future inflation 
B) that inflation is negatively related to the unemployment gap 
C) that in the long run unemployment will be at the natural rate 
D) all of the above 
E) none of the above

Question 7

In the long run ________.

Accepted Answer

A) the amount of output an economy can produce is determined by real variables like capital,labor and technological advances 
B) aggregate supply is fixed at the potential level of output 
C) there is enough time for prices to fully adjust so the classical dichotomy holds 
D) all of the above 
E) none of the above 
A) the amount of output an economy can produce is determined by real variables like capital,labor and technological advances 
B) aggregate supply is fixed at the potential level of output 
C) there is enough time for prices to fully adjust so the classical dichotomy holds 
D) all of the above 
E) none of the above

Question 8

The idea behind the Phillips curve is that ________.

Accepted Answer

A) tightness in the labor market raises wages but has little impact on prices 
B) when the unemployment rate is low,wages will decrease 
C) when firms raise wages to attract new workers,prices will also increase 
D) all of the above 
E) none of the above 
A) tightness in the labor market raises wages but has little impact on prices 
B) when the unemployment rate is low,wages will decrease 
C) when firms raise wages to attract new workers,prices will also increase 
D) all of the above 
E) none of the above

Question 9

Aggregate Supply Curves (2)  
-On the graph above,
(a)draw the new short-run aggregate supply curve that results when the economy has been at point 2 for one period,ceteris paribus (do not label the new output level or inflation rate)
(b)on the original AS curve,add a point "3" where output is 10.5.On the vertical axis,label the rate of inflation that corresponds to output of 10.5.
(c)draw the new short-run aggregate supply curve that results when the economy has been at point 3 for one period,ceteris paribus (do not label the new output level or inflation rate)

Accepted Answer

The answer of Aggregate Supply Curves (2)  
-On the...

Question 10

On the modern Phillips curve,the beginning of a recession is shown by ________.

Accepted Answer

A) an upward movement along the Phillips curve to a higher inflation rate 
B) an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate 
C) a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate 
D) a downward movement along the Phillips curve to higher unemployment rates 
E) none of the above 
A) an upward movement along the Phillips curve to a higher inflation rate 
B) an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate 
C) a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate 
D) a downward movement along the Phillips curve to higher unemployment rates 
E) none of the above

Question 11

In the long run ________.

Accepted Answer

A) the aggregate supply is vertical with respect to output 
B) the Phillips curve is vertical with respect to unemployment 
C) fluctuations in the inflation rate have no impact on output and unemployment 
D) all of the above 
E) none of the above 
A) the aggregate supply is vertical with respect to output 
B) the Phillips curve is vertical with respect to unemployment 
C) fluctuations in the inflation rate have no impact on output and unemployment 
D) all of the above 
E) none of the above

Question 12

In Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve,________.

Accepted Answer

A) unemployment will,in the long run,reach the natural rate 
B) in the long run,expected inflation will reach the NAIRU 
C) inflation is positively related to the unemployment gap 
D) all of the above 
E) none of the above 
A) unemployment will,in the long run,reach the natural rate 
B) in the long run,expected inflation will reach the NAIRU 
C) inflation is positively related to the unemployment gap 
D) all of the above 
E) none of the above

Question 13

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

Accepted Answer

A) that there is no long run tradeoff between unemployment and inflation 
B) that there is a short run tradeoff between unemployment and inflation 
C) that there are two types of Phillips curves 
D) all of the above 
E) none of the above 
A) that there is no long run tradeoff between unemployment and inflation 
B) that there is a short run tradeoff between unemployment and inflation 
C) that there are two types of Phillips curves 
D) all of the above 
E) none of the above

Question 14

Which of the following best approximates Okun's law?

Accepted Answer

A) a 1 percent increase in output leads to a 2 percent decrease in unemployment 
B) a 1 percent increase in output leads to a 1 percent decrease in unemployment 
C) a 2 percent increase in output leads to a 4 percent increase in unemployment 
D) a 2 percent increase in output leads to a 1 percent decrease in unemployment 
E) none of the above 
A) a 1 percent increase in output leads to a 2 percent decrease in unemployment 
B) a 1 percent increase in output leads to a 1 percent decrease in unemployment 
C) a 2 percent increase in output leads to a 4 percent increase in unemployment 
D) a 2 percent increase in output leads to a 1 percent decrease in unemployment 
E) none of the above

Question 15

Based on the data in this table,  
If the natural rate of unemployment is steady at 7 percent,and,in period four,there is no price shock and unemployment is 8 percent,then the inflation rate in period 4 will be ________ percent.

Accepted Answer

A) 4.4 
B) 3.6 
C) 3.4 
D) 1.6 
E) none of the above 
A) 4.4 
B) 3.6 
C) 3.4 
D) 1.6 
E) none of the above

Question 16

Aggregate Supply Curves (1)  
-Based on the graph above,the short-run aggregate supply curve is ________.

Accepted Answer

A) π = 2 + 1.5 (Y - 10)+ ρ 
B) Y = 8  
+
  
(π)+ ρ 
C) π = 2 + (Y - 11)+ ρ 
D) π = 3.5 + 2 (Y - 10)+ ρ 
E) none of the above 
A) π = 2 + 1.5 (Y - 10)+ ρ 
B) Y = 8  
+
  
(π)+ ρ 
C) π = 2 + (Y - 11)+ ρ 
D) π = 3.5 + 2 (Y - 10)+ ρ 
E) none of the above

Question 17

Which of the following might cause an upward shift of the modern Phillips curve?

Accepted Answer

A) an increase in oil prices 
B) an increase in the price of imports 
C) wage agreements that include compensation for inflation 
D) all of the above 
E) none of the above 
A) an increase in oil prices 
B) an increase in the price of imports 
C) wage agreements that include compensation for inflation 
D) all of the above 
E) none of the above

Question 18

If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent,then next period's short-run aggregate supply curve might be ________.

Accepted Answer

A) π = 5 - 0.5 (13 - 15) 
B) π = 5 + 0.5 (13 - 15) 
C) π = 4 + 0.5 (13 - 15) 
D) π = 5 + 2 (11 - 15) 
E) none of the above 
A) π = 5 - 0.5 (13 - 15) 
B) π = 5 + 0.5 (13 - 15) 
C) π = 4 + 0.5 (13 - 15) 
D) π = 5 + 2 (11 - 15) 
E) none of the above

Question 19

Given the accelerationist Phillips curve Δπ = - 0.3 (U - 6)+ ρ,suppose that inflation in the preceding period was 3 percent,unemployment is 6 percent,and there is a price shock of 2 percent.The current inflation rate is ________.

Accepted Answer

A) 3 percent 
B) 0.2 percent 
C) 5 percent 
D) 1 percent 
E) none of the above 
A) 3 percent 
B) 0.2 percent 
C) 5 percent 
D) 1 percent 
E) none of the above

Question 20

On the modern Phillips curve,the initial impact of an increase in the world price of steel is shown by ________.

Accepted Answer

A) an upward movement along the Phillips curve to a higher inflation rate 
B) an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate 
C) a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate 
D) a downward movement along the Phillips curve to higher unemployment rates 
E) none of the above 
A) an upward movement along the Phillips curve to a higher inflation rate 
B) an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate 
C) a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate 
D) a downward movement along the Phillips curve to higher unemployment rates 
E) none of the above

Exam 11: Aggregate Supply and the Phillips Curve

In the short run ________.

Given the accelerationist Phillips curve Δπ = - 0.7 (U - 5)+ ρ,suppose that inflation has increased from 8 percent to 10 percent.If the unemployment rate is 4 percent,then the price shock is ________.

In the short run,if current output remains persistently above potential ________.

Why is there no long-run trade-off between unemployment and inflation?

The short-run aggregate supply curve shows that a change in inflation will cause (a)change(s)in ________.

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

In the long run ________.

The idea behind the Phillips curve is that ________.

On the modern Phillips curve,the beginning of a recession is shown by ________.

In the long run ________.

In Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve,________.

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

Which of the following best approximates Okun's law?

Based on the data in this table, If the natural rate of unemployment is steady at 7 percent,and,in period four,there is no price shock and unemployment is 8 percent,then the inflation rate in period 4 will be ________ percent.

Aggregate Supply Curves (1) -Based on the graph above,the short-run aggregate supply curve is ________.

Which of the following might cause an upward shift of the modern Phillips curve?

If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent,then next period's short-run aggregate supply curve might be ________.

Given the accelerationist Phillips curve Δπ = - 0.3 (U - 6)+ ρ,suppose that inflation in the preceding period was 3 percent,unemployment is 6 percent,and there is a price shock of 2 percent.The current inflation rate is ________.

On the modern Phillips curve,the initial impact of an increase in the world price of steel is shown by ________.

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