Question 1

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Accepted Answer

A)  where expected inflation is greater than actual inflation 
B)  where expected inflation equals actual inflation 
C)  where the quantity of goods and services demanded equals the quantity supplied 
D)  where the quantity of labour demanded equals the quantity supplied 
A)  where expected inflation is greater than actual inflation 
B)  where expected inflation equals actual inflation 
C)  where the quantity of goods and services demanded equals the quantity supplied 
D)  where the quantity of labour demanded equals the quantity supplied

Question 2

What would we NOT expect to happen if government policy moved the economy up along a given short-run Phillips curve?

Accepted Answer

A)  Ravi reads in the newspaper that the central bank decreased the money supply. 
B)  Tony gets more job offers. 
C)  Louis makes larger increases in the prices at his health food store. 
D)  Jessica's nominal wage increases at a faster rate. 
A)  Ravi reads in the newspaper that the central bank decreased the money supply. 
B)  Tony gets more job offers. 
C)  Louis makes larger increases in the prices at his health food store. 
D)  Jessica's nominal wage increases at a faster rate.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 7 percent would require sacrificing how much annual output?

Accepted Answer

A)  2 percent of annual output 
B)  7 percent of annual output 
C)  9 percent of annual output 
D)  10 percent of annual output 
A)  2 percent of annual output 
B)  7 percent of annual output 
C)  9 percent of annual output 
D)  10 percent of annual output

Question 5

Figure 16-3  
-Refer to the Figure 16-3.Starting from c and 3,in the long run,where does a decrease in money supply growth move the economy to?

Accepted Answer

A)  a and 1 
B)  e and 5 
C)  d and 4 
A)  a and 1 
B)  e and 5 
C)  d and 4

Question 6

Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?

Accepted Answer

The short-run Phillips curve (SRPC)was d

Question 7

Which equation summarize the analysis of Friedman and Phelps (where a is a positive number)?

Accepted Answer

A)  unemployment rate = natural rate of unemployment - a(actual inflation - expected inflation) 
B)  unemployment rate = natural rate of unemployment - a(expected inflation - actual inflation) 
C)  unemployment rate = expected rate of inflation - a(actual inflation - expected inflation) 
D)  unemployment rate = actual rate of inflation - a(actual unemployment - expected unemployment) 
A)  unemployment rate = natural rate of unemployment - a(actual inflation - expected inflation) 
B)  unemployment rate = natural rate of unemployment - a(expected inflation - actual inflation) 
C)  unemployment rate = expected rate of inflation - a(actual inflation - expected inflation) 
D)  unemployment rate = actual rate of inflation - a(actual unemployment - expected unemployment)

Question 8

According to classical macroeconomic theory,what does money growth influence in the long run?

Accepted Answer

A)  both real and nominal variables 
B)  the unemployment rate and output 
C)  only real variables 
D)  only nominal variables 
A)  both real and nominal variables 
B)  the unemployment rate and output 
C)  only real variables 
D)  only nominal variables

Question 9

Use the AD / AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Accepted Answer

With perfect capital mobility,the centra

Question 10

This exercise uses an aggregate-supply curve and a production function to construct the corresponding Phillips curve.Its purpose is to better understand the assumptions behind the short-run Phillips curve.Suppose the aggregate production function of an economy is Y=L,where Y is output and L is labour (employment).Unemployment is U=LF-L,and the unemployment rate is u = U / LF.We also need to assume that the labour force (LF)is constant,such that an increase in the number of employed people (ΔL)corresponds to an equal decrease in the number of unemployed (-ΔU).Let us assume a very simple-short run aggregate supply curve,Y=P.Question: For the price levels P equal 100,105,and 115,find two inflation-unemployment points in a Phillips curve diagram.Consider LF=120.

Accepted Answer

The calculations are given in the follow

Question 11

What will an adverse supply shock cause output and prices to do?

Accepted Answer

A)  It will cause output and prices to rise. 
B)  It will cause output and prices to fall. 
C)  It will cause output to rise and prices to fall. 
D)  It will cause output to fall and prices to rise. 
A)  It will cause output and prices to rise. 
B)  It will cause output and prices to fall. 
C)  It will cause output to rise and prices to fall. 
D)  It will cause output to fall and prices to rise.

Question 12

Figure 16-3  
-Refer to the Figure 16-3.Starting from c and 3,in the long run,where does an increase in money supply growth move the economy to?

Accepted Answer

A)  a and 1 
B)  e and 4 
C)  d and 4 
D)  e and 5 
A)  a and 1 
B)  e and 4 
C)  d and 4 
D)  e and 5

Question 13

Figure 16-2  
-Refer to the Figure 16-2.What is Curve 2?

Accepted Answer

A)  the long-run Phillips curve 
B)  the short-run Phillips curve 
C)  the long-run aggregate-demand curve 
D)  the short-run aggregate-demand curve 
A)  the long-run Phillips curve 
B)  the short-run Phillips curve 
C)  the long-run aggregate-demand curve 
D)  the short-run aggregate-demand curve

Question 14

Figure 16-4  
-Refer to the Figure 16-4.At point m,how do actual and expected inflation rates and unemployment rates compare?

Accepted Answer

A)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
B)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment. 
C)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
D)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment. 
A)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
B)  The actual inflation rate exceeds the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment. 
C)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate exceeds the natural rate of unemployment. 
D)  The actual inflation rate is less than the expected inflation rate and the actual unemployment rate is less than the natural rate of unemployment.

Question 15

In responding to the Phillips curve hypothesis,what did Friedman argue that a central bank can peg?

Accepted Answer

A)  the unemployment rate 
B)  the price level 
C)  the growth rate of real GDP 
D)  the real exchange rate 
A)  the unemployment rate 
B)  the price level 
C)  the growth rate of real GDP 
D)  the real exchange rate

Question 16

How does the short-run Phillips curve reflect an increase in the price of oil such as occurred in the early 1970s?

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 17

Figure 16-1  
-Refer to Figure 16-1.If the economy starts at c and 1,then in the short run,where does an increase in the money supply move the economy?

Accepted Answer

A)  a and 1 
B)  b and 2 
C)  c and 3 
D)  a and 3 
A)  a and 1 
B)  b and 2 
C)  c and 3 
D)  a and 3

Question 18

What would shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the money supply 
B)  an increase in the tax rate 
C)  increases in unemployment compensation 
D)  a decrease in the unemployment rate 
A)  an increase in the money supply 
B)  an increase in the tax rate 
C)  increases in unemployment compensation 
D)  a decrease in the unemployment rate

Question 19

Figure 16-4  
-Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short run?

Accepted Answer

A)  point a 
B)  point b 
C)  point c 
D)  point d 
A)  point a 
B)  point b 
C)  point c 
D)  point d

Question 20

In 1980,what was the Canadian inflation rate and unemployment rate?

Accepted Answer

A)  The inflation rate was about 2 percent,and the unemployment rate was about 8 percent. 
B)  The inflation rate was about 6 percent,and the unemployment rate was about 2 percent. 
C)  The inflation rate was about 7 percent,and the unemployment rate was about 10 percent. 
D)  The inflation rate was about 10 percent,and the unemployment rate was about 7 percent. 
A)  The inflation rate was about 2 percent,and the unemployment rate was about 8 percent. 
B)  The inflation rate was about 6 percent,and the unemployment rate was about 2 percent. 
C)  The inflation rate was about 7 percent,and the unemployment rate was about 10 percent. 
D)  The inflation rate was about 10 percent,and the unemployment rate was about 7 percent.

Where does the short-run Phillips curve intersect the long-run Phillips curve?

What would we NOT expect to happen if government policy moved the economy up along a given short-run Phillips curve?

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

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 7 percent would require sacrificing how much annual output?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does a decrease in money supply growth move the economy to?

Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?

Which equation summarize the analysis of Friedman and Phelps (where a is a positive number)?

According to classical macroeconomic theory,what does money growth influence in the long run?

Use the AD / AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

What will an adverse supply shock cause output and prices to do?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does an increase in money supply growth move the economy to?

Figure 16-2 -Refer to the Figure 16-2.What is Curve 2?

Figure 16-4 -Refer to the Figure 16-4.At point m,how do actual and expected inflation rates and unemployment rates compare?

In responding to the Phillips curve hypothesis,what did Friedman argue that a central bank can peg?

How does the short-run Phillips curve reflect an increase in the price of oil such as occurred in the early 1970s?

Figure 16-1 -Refer to Figure 16-1.If the economy starts at c and 1,then in the short run,where does an increase in the money supply move the economy?

What would shift the long-run Phillips curve to the right?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short run?

In 1980,what was the Canadian inflation rate and unemployment rate?

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

Where does the short-run Phillips curve intersect the long-run Phillips curve?

What would we NOT expect to happen if government policy moved the economy up along a given short-run Phillips curve?

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

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 7 percent would require sacrificing how much annual output?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does a decrease in money supply growth move the economy to?

Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?

Which equation summarize the analysis of Friedman and Phelps (where a is a positive number)?

According to classical macroeconomic theory,what does money growth influence in the long run?

Use the AD / AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

What will an adverse supply shock cause output and prices to do?

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does an increase in money supply growth move the economy to?

Figure 16-2 -Refer to the Figure 16-2.What is Curve 2?

Figure 16-4 -Refer to the Figure 16-4.At point m,how do actual and expected inflation rates and unemployment rates compare?

In responding to the Phillips curve hypothesis,what did Friedman argue that a central bank can peg?

How does the short-run Phillips curve reflect an increase in the price of oil such as occurred in the early 1970s?

Figure 16-1 -Refer to Figure 16-1.If the economy starts at c and 1,then in the short run,where does an increase in the money supply move the economy?

What would shift the long-run Phillips curve to the right?

Figure 16-4 -Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short run?

In 1980,what was the Canadian inflation rate and unemployment rate?

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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