Question 1

What did Friedman and Phelps argue about inflation and unemployment?

Accepted Answer

A)  that in the long run,monetary growth did not influence those factors that determine the unemployment rate 
B)  that the Phillips curve could be exploited in the long run by using monetary,but not fiscal policy 
C)  that the short-run Phillips curve was very steep but the long-run curve was very flat 
D)  that there was neither a short-run nor long-run tradeoff between inflation and unemployment 
A)  that in the long run,monetary growth did not influence those factors that determine the unemployment rate 
B)  that the Phillips curve could be exploited in the long run by using monetary,but not fiscal policy 
C)  that the short-run Phillips curve was very steep but the long-run curve was very flat 
D)  that there was neither a short-run nor long-run tradeoff between inflation and unemployment

Question 2

Figure 16-4  
-Refer to the Figure 16-4.Along SRPC1,what is the expected rate of inflation?

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 3

Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?

Accepted Answer

A)  Prices,output,and employment all rise. 
B)  Prices and output rise,and employment falls. 
C)  Prices rise,and output and employment fall. 
D)  Prices fall,and output and employment rise. 
A)  Prices,output,and employment all rise. 
B)  Prices and output rise,and employment falls. 
C)  Prices rise,and output and employment fall. 
D)  Prices fall,and output and employment rise.

Question 4

Figure 16-2  
-Refer to the Figure 16-2.Suppose the economy is initially at point c.If the money supply increases,where does the economy move to in the short-run?

Accepted Answer

A)  b 
B)  d 
C)  e 
D)  a 
A)  b 
B)  d 
C)  e 
D)  a

Question 5

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

Accepted Answer

A)  Department for Business,Innovation,and Skills 
B)  Ministry of Finance 
C)  Department of the Treasury 
D)  Statistics Canada 
A)  Department for Business,Innovation,and Skills 
B)  Ministry of Finance 
C)  Department of the Treasury 
D)  Statistics Canada

Question 6

Figure 16-4  
-Refer to the 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 7

Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?

Accepted Answer

A)  Unemployment would be higher,and output would be lower. 
B)  Unemployment would be higher,and output would be higher. 
C)  Unemployment would be lower,and output would be lower. 
D)  Unemployment would be lower,and output would be higher. 
A)  Unemployment would be higher,and output would be lower. 
B)  Unemployment would be higher,and output would be higher. 
C)  Unemployment would be lower,and output would be lower. 
D)  Unemployment would be lower,and output would be higher.

Question 8

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 9

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

What is a long-run economic aspect on which most economists agree?

Accepted Answer

A)  The natural rate of unemployment depends primarily on the level of aggregate demand. 
B)  Inflation depends primarily upon the money supply growth rate. 
C)  There is a direct relationship between the inflation rate and the natural rate of unemployment. 
D)  The rate of economic growth depends primarily on the growth in money supply. 
A)  The natural rate of unemployment depends primarily on the level of aggregate demand. 
B)  Inflation depends primarily upon the money supply growth rate. 
C)  There is a direct relationship between the inflation rate and the natural rate of unemployment. 
D)  The rate of economic growth depends primarily on the growth in money supply.

Question 12

Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

Accepted Answer

In the short run,unemployment will rise,

Question 13

If the short-run Phillips curve were stable,what would be unusual?

Accepted Answer

A)  an increase in inflation and an increase in output 
B)  a decrease in inflation and an increase in unemployment 
C)  an increase in both inflation and unemployment 
D)  an increase in output and a decrease in unemployment 
A)  an increase in inflation and an increase in output 
B)  a decrease in inflation and an increase in unemployment 
C)  an increase in both inflation and unemployment 
D)  an increase in output and a decrease in unemployment

Question 14

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

Accepted Answer

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

Question 15

In the short run,policy that decreases the aggregate demand also decreases which of the following?

Accepted Answer

A)  the price level 
B)  the unemployment rate 
C)  the aggregate supply 
D)  the natural rate of unemployment 
A)  the price level 
B)  the unemployment rate 
C)  the aggregate supply 
D)  the natural rate of unemployment

Question 16

Faced with an adverse supply shock,what can policymakers increase,and how will prices and output be affected?

Accepted Answer

A)  They can increase aggregate demand,which increases prices and output. 
B)  They can increase aggregate demand,which decreases prices and increases output. 
C)  They can increase aggregate supply,which increases prices and output. 
D)  They can increase aggregate supply,which decreases prices and increases output. 
A)  They can increase aggregate demand,which increases prices and output. 
B)  They can increase aggregate demand,which decreases prices and increases output. 
C)  They can increase aggregate supply,which increases prices and output. 
D)  They can increase aggregate supply,which decreases prices and increases output.

Question 17

A policy change that reduced the natural rate of unemployment would shift both the long-run aggregate-supply curve and the long-run Phillips curve left.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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

Accepted Answer

A)  Inflation will be higher. 
B)  Unemployment will be lower. 
C)  Real GDP will be higher. 
D)  Unemployment will be higher. 
A)  Inflation will be higher. 
B)  Unemployment will be lower. 
C)  Real GDP will be higher. 
D)  Unemployment will be higher.

Question 20

An estimate of the short-run Phillips curve for a hypothetical economy is u = 12 - 1.5ð,where u is the unemployment rate and ð is the inflation rate.
a.If the natural rate of unemployment is 8 percent,what is the expected inflation rate that is consistent with this short-run Phillips curve?
b.Suppose the government passes legislation that decreases the natural rate of unemployment by two percentage points.What is the new long-term inflation rate?

Accepted Answer

a.The general equation of the short-run

What did Friedman and Phelps argue about inflation and unemployment?

Figure 16-4 -Refer to the Figure 16-4.Along SRPC1,what is the expected rate of inflation?

Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?

Figure 16-2 -Refer to the Figure 16-2.Suppose the economy is initially at point c.If the money supply increases,where does the economy move to in the short-run?

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

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

Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?

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?

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

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

What is a long-run economic aspect on which most economists agree?

Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

If the short-run Phillips curve were stable,what would be unusual?

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

In the short run,policy that decreases the aggregate demand also decreases which of the following?

Faced with an adverse supply shock,what can policymakers increase,and how will prices and output be affected?

A policy change that reduced the natural rate of unemployment would shift both the long-run aggregate-supply curve and the long-run Phillips curve left.

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

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

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 Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Five Debates Over Macroeconomic Policy

Filters

Exam 16: The Short-Run Tradeoff Between Inflation and Unemployment

What did Friedman and Phelps argue about inflation and unemployment?

Figure 16-4 -Refer to the Figure 16-4.Along SRPC1,what is the expected rate of inflation?

Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?

Figure 16-2 -Refer to the Figure 16-2.Suppose the economy is initially at point c.If the money supply increases,where does the economy move to in the short-run?

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

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

Suppose the long-run Phillips curve shifts to the right.For any given rate of money growth and inflation,how would unemployment and output change?

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?

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by 1 percentage point.

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

What is a long-run economic aspect on which most economists agree?

Suppose that the Bank of Canada unexpectedly decreases the money supply.What will happen to unemployment in the short run? What will happen to unemployment in the long run?

If the short-run Phillips curve were stable,what would be unusual?

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

In the short run,policy that decreases the aggregate demand also decreases which of the following?

Faced with an adverse supply shock,what can policymakers increase,and how will prices and output be affected?

A policy change that reduced the natural rate of unemployment would shift both the long-run aggregate-supply curve and the long-run Phillips curve left.

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

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

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 Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Five Debates Over Macroeconomic Policy

Filters