Question 1

Suppose the government decides to decrease the income tax.What is the primary effect of this decision?

Accepted Answer

A)  It decreases unemployment in the long-run. 
B)  It increases output in the long-run. 
C)  It decreases the price level in the short-run. 
D)  It increases inflation in the short-run. 
A)  It decreases unemployment in the long-run. 
B)  It increases output in the long-run. 
C)  It decreases the price level in the short-run. 
D)  It increases inflation in the short-run.

Question 2

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

Question 3

How does the short-run Phillips curve reflect a financial crisis such as the one in 2008-2009?

Accepted Answer

A)  as a leftward shift in the short-run Phillips curve 
B)  as a rightward shift in the short-run Phillips curve 
C)  as a downward movement along the short-run Phillips curve 
D)  as an upward movement along the short-run Phillips curve 
A)  as a leftward shift in the short-run Phillips curve 
B)  as a rightward shift in the short-run Phillips curve 
C)  as a downward movement along the short-run Phillips curve 
D)  as an upward movement along the short-run Phillips curve

Question 4

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,what are the values of unemployment and inflation?

Accepted Answer

A)  Unemployment equals the natural rate,and expected inflation equals actual inflation. 
B)  Unemployment is above the natural rate,and expected inflation equals actual inflation. 
C)  Unemployment equals the natural rate,and expected inflation is lower than actual inflation. 
D)  Unemployment is below the natural rate,and inflation is greater than the expected rate. 
A)  Unemployment equals the natural rate,and expected inflation equals actual inflation. 
B)  Unemployment is above the natural rate,and expected inflation equals actual inflation. 
C)  Unemployment equals the natural rate,and expected inflation is lower than actual inflation. 
D)  Unemployment is below the natural rate,and inflation is greater than the expected rate.

Question 5

In which situation will the economy move to a point on the Phillips curve where unemployment is higher?

Accepted Answer

A)  if the inflation rate increases 
B)  if the government increases its expenditures 
C)  if the Bank of Canada decreases the money supply 
D)  if expected inflation increases 
A)  if the inflation rate increases 
B)  if the government increases its expenditures 
C)  if the Bank of Canada decreases the money supply 
D)  if expected inflation increases

Question 6

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 5 percent would require sacrificing what percent of annual output?

Accepted Answer

A)  2 percent of annual output 
B)  5 percent of annual output 
C)  6 percent of annual output 
D)  15 percent of annual output 
A)  2 percent of annual output 
B)  5 percent of annual output 
C)  6 percent of annual output 
D)  15 percent of annual output

Question 7

In the long run,what are the effects of a decrease in the rate of growth of the money supply?

Accepted Answer

A)  It will increase inflation and shift the short-run Phillips curve right. 
B)  It will increase inflation and shift the short-run Phillips curve left. 
C)  It will decrease inflation and shift the short-run Philips curve right. 
D)  It will decrease inflation and shift the short-run Phillips curve left. 
A)  It will increase inflation and shift the short-run Phillips curve right. 
B)  It will increase inflation and shift the short-run Phillips curve left. 
C)  It will decrease inflation and shift the short-run Philips curve right. 
D)  It will decrease inflation and shift the short-run Phillips curve left.

Question 8

Economists generally agree that there is a short-run Phillips curve.However,some economists believe that the short-run Phillips curve is steep and that inflation expectations adjust quickly so the long run is short-lived.What do such beliefs imply about the benefits of using policy to reduce unemployment? What do such beliefs imply about the costs of using policy to reduce inflation?

Accepted Answer

If the Phillips curve is steep,then an i

Question 9

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 10

What would NOT be associated with an adverse supply shock?

Accepted Answer

A)  short-run Phillips curve shifts right 
B)  unemployment rises 
C)  price level falls 
D)  output falls 
A)  short-run Phillips curve shifts right 
B)  unemployment rises 
C)  price level falls 
D)  output falls

Question 11

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 12

Which statement best describes how the natural rate of unemployment changes?

Accepted Answer

A)  It cannot change; it is constant over time. 
B)  It does not change by any actions of the government. 
C)  It changes if the maximum legal number of work hours a week changes. 
D)  It changes if the rate at which the Bank of Canada increases the money supply changes. 
A)  It cannot change; it is constant over time. 
B)  It does not change by any actions of the government. 
C)  It changes if the maximum legal number of work hours a week changes. 
D)  It changes if the rate at which the Bank of Canada increases the money supply changes.

Question 13

What is one determinant of the natural rate of unemployment?

Accepted Answer

A)  the rate of growth of the money supply 
B)  the generosity of Employment Insurance 
C)  the expected inflation rate 
D)  the exchange rate 
A)  the rate of growth of the money supply 
B)  the generosity of Employment Insurance 
C)  the expected inflation rate 
D)  the exchange rate

Question 14

In the long run,what effect does an increase in the money supply have on prices and unemployment?

Accepted Answer

A)  It leaves prices and unemployment unchanged. 
B)  It lowers prices and unemployment. 
C)  It raises prices and leaves unemployment unchanged. 
D)  It leaves prices unchanged and reduces unemployment. 
A)  It leaves prices and unemployment unchanged. 
B)  It lowers prices and unemployment. 
C)  It raises prices and leaves unemployment unchanged. 
D)  It leaves prices unchanged and reduces unemployment.

Question 15

Which of the following is an adverse supply shock?

Accepted Answer

A)  a decrease in the money supply 
B)  a tax cut 
C)  a worldwide drought 
D)  decreased government spending 
A)  a decrease in the money supply 
B)  a tax cut 
C)  a worldwide drought 
D)  decreased government spending

Question 16

Suppose the long-run Phillips curve shifts to the left.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 17

How much was the unemployment rate in Canada in 1983?

Accepted Answer

A)  about 4 percent 
B)  about 6 percent 
C)  about 8 percent 
D)  more than 10 percent 
A)  about 4 percent 
B)  about 6 percent 
C)  about 8 percent 
D)  more than 10 percent

Question 18

What is the misery index supposed to measure?

Accepted Answer

A)  the market power of unions 
B)  the health of the economy 
C)  the degree of inequality 
D)  the standard of living 
A)  the market power of unions 
B)  the health of the economy 
C)  the degree of inequality 
D)  the standard of living

Question 19

In the long run,the inflation rate depends primarily on money supply growth.

Accepted Answer

A) True 
 B)False

Question 20

Which term refers to the short-run relationship between inflation and unemployment?

Accepted Answer

A)  equity-efficiency tradeoff 
B)  money neutrality 
C)  the Phillips curve 
D)  the Keynesian cross 
A)  equity-efficiency tradeoff 
B)  money neutrality 
C)  the Phillips curve 
D)  the Keynesian cross

Suppose the government decides to decrease the income tax.What is the primary effect of this decision?

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

How does the short-run Phillips curve reflect a financial crisis such as the one in 2008-2009?

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,what are the values of unemployment and inflation?

In which situation will the economy move to a point on the Phillips curve where unemployment is higher?

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 5 percent would require sacrificing what percent of annual output?

In the long run,what are the effects of a decrease in the rate of growth of the money supply?

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

What would NOT be associated with an adverse supply shock?

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

Which statement best describes how the natural rate of unemployment changes?

What is one determinant of the natural rate of unemployment?

In the long run,what effect does an increase in the money supply have on prices and unemployment?

Which of the following is an adverse supply shock?

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

How much was the unemployment rate in Canada in 1983?

What is the misery index supposed to measure?

In the long run,the inflation rate depends primarily on money supply growth.

Which term refers to the short-run relationship between inflation and unemployment?

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

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

Suppose the government decides to decrease the income tax.What is the primary effect of this decision?

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

How does the short-run Phillips curve reflect a financial crisis such as the one in 2008-2009?

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,what are the values of unemployment and inflation?

In which situation will the economy move to a point on the Phillips curve where unemployment is higher?

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 5 percent would require sacrificing what percent of annual output?

In the long run,what are the effects of a decrease in the rate of growth of the money supply?

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

What would NOT be associated with an adverse supply shock?

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

Which statement best describes how the natural rate of unemployment changes?

What is one determinant of the natural rate of unemployment?

In the long run,what effect does an increase in the money supply have on prices and unemployment?

Which of the following is an adverse supply shock?

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

How much was the unemployment rate in Canada in 1983?

What is the misery index supposed to measure?

In the long run,the inflation rate depends primarily on money supply growth.

Which term refers to the short-run relationship between inflation and unemployment?

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