Question 1

A favorable supply shock will cause inflation to

Accepted Answer

A) rise and shift the short-run Phillips curve right. 
B) rise and shift the short-run Phillips curve left. 
C) fall and shift the short-run Phillips curve right. 
D) fall and shift the short-run Phillips curve left. 
A) rise and shift the short-run Phillips curve right. 
B) rise and shift the short-run Phillips curve left. 
C) fall and shift the short-run Phillips curve right. 
D) fall and shift the short-run Phillips curve left. D

Question 2

An adverse supply shock causes output to

Accepted Answer

A) rise.To counter this a central bank would increase the money supply. 
B) rise.To counter this a central bank would decrease the money supply. 
C) fall.To counter this a central bank would increase the money supply. 
D) fall.To counter this a central bank would decrease the money supply. 
A) rise.To counter this a central bank would increase the money supply. 
B) rise.To counter this a central bank would decrease the money supply. 
C) fall.To counter this a central bank would increase the money supply. 
D) fall.To counter this a central bank would decrease the money supply. C

Question 3

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate."    
-Refer to Figure 35-9.What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A) time 
B) the unemployment rate 
C) real GDP 
D) the growth rate of real GDP 
A) time 
B) the unemployment rate 
C) real GDP 
D) the growth rate of real GDP B

Question 4

Which of the following is correct if there is an adverse supply shock?

Accepted Answer

A) The short-run aggregate supply curve and the short-run Phillips curve both shift right. 
B) The short-run aggregate supply curve and the short-run Phillips curve both shift left. 
C) The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. 
D) The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right. 
A) The short-run aggregate supply curve and the short-run Phillips curve both shift right. 
B) The short-run aggregate supply curve and the short-run Phillips curve both shift left. 
C) The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. 
D) The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

Question 5

If there is an increase in the price of oil,then

Accepted Answer

A) unemployment rises.If the central bank tries to counter this increase,inflation rises. 
B) unemployment rises.If the central bank tries to counter this increase,inflation falls. 
C) unemployment falls.If the central bank tries to counter this decrease,inflation falls. 
D) unemployment falls.If the central bank tries to counter this decrease,inflation rises. 
A) unemployment rises.If the central bank tries to counter this increase,inflation rises. 
B) unemployment rises.If the central bank tries to counter this increase,inflation falls. 
C) unemployment falls.If the central bank tries to counter this decrease,inflation falls. 
D) unemployment falls.If the central bank tries to counter this decrease,inflation rises.

Question 6

If the Fed wants to reverse the effects of a favorable supply shock on unemployment,it should

Accepted Answer

A) increase the money supply growth rate which raises the inflation rate. 
B) increase the money supply growth rate which reduces the inflation rate. 
C) decrease the money supply growth rate which raises the inflation rate. 
D) decrease the money supply growth rate which reduces the inflation rate. 
A) increase the money supply growth rate which raises the inflation rate. 
B) increase the money supply growth rate which reduces the inflation rate. 
C) decrease the money supply growth rate which raises the inflation rate. 
D) decrease the money supply growth rate which reduces the inflation rate.

Question 7

In the 1970's the Federal Reserve responded to an adverse supply shock.Its policy made

Accepted Answer

A) the recession that followed smaller and so provided a more favorable tradeoff between inflation and unemployment. 
B) the recession that followed smaller,but in doing so produced a less favorable tradeoff between inflation and unemployment. 
C) the recession that followed larger,but in doing so provided a more favorable tradeoff between inflation and unemployment. 
D) the recession that followed larger and also produced a less favorable tradeoff between inflation and unemployment. 
A) the recession that followed smaller and so provided a more favorable tradeoff between inflation and unemployment. 
B) the recession that followed smaller,but in doing so produced a less favorable tradeoff between inflation and unemployment. 
C) the recession that followed larger,but in doing so provided a more favorable tradeoff between inflation and unemployment. 
D) the recession that followed larger and also produced a less favorable tradeoff between inflation and unemployment.

Question 8

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate."    
-Refer to Figure 35-9.A movement of the economy from point A to point B,and at the same time a movement from point C to point D,would be described as

Accepted Answer

A) the outcome of a favorable supply shock. 
B) falling inflation. 
C) stagflation. 
D) All of the above are correct. 
A) the outcome of a favorable supply shock. 
B) falling inflation. 
C) stagflation. 
D) All of the above are correct.

Question 9

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops.The good weather would

Accepted Answer

A) shift both the short-run aggregate supply and the short-run Phillips curve right. 
B) shift both the short-run aggregate supply and the short-run Phillips curve left. 
C) shift the short-run aggregate supply curve to the right,and the short-run Phillips curve to the left. 
D) shift the short-run aggregate supply curve to the left,and the short-run Phillips curve to the right. 
A) shift both the short-run aggregate supply and the short-run Phillips curve right. 
B) shift both the short-run aggregate supply and the short-run Phillips curve left. 
C) shift the short-run aggregate supply curve to the right,and the short-run Phillips curve to the left. 
D) shift the short-run aggregate supply curve to the left,and the short-run Phillips curve to the right.

Question 10

The large increase in oil prices in the 1970s was caused primarily by a(n)

Accepted Answer

A) increase in demand for oil. 
B) decrease in demand for oil. 
C) decrease in the supply of oil. 
D) increase in the supply of oil. 
A) increase in demand for oil. 
B) decrease in demand for oil. 
C) decrease in the supply of oil. 
D) increase in the supply of oil.

Question 11

In response to an adverse supply shock,suppose the Fed implements accommodating monetary policy.Which of the following occurs as a result of the accommodating monetary policy?

Accepted Answer

A) Aggregate demand shifts to the left,which increases inflation and increases unemployment in the short run. 
B) Aggregate demand shifts to the left,which decreases inflation and increases unemployment in the short run. 
C) Aggregate demand shifts to the right,which increases inflation and increases unemployment in the short run. 
D) Aggregate demand shifts to the right,which increases inflation and decreases unemployment in the short run. 
A) Aggregate demand shifts to the left,which increases inflation and increases unemployment in the short run. 
B) Aggregate demand shifts to the left,which decreases inflation and increases unemployment in the short run. 
C) Aggregate demand shifts to the right,which increases inflation and increases unemployment in the short run. 
D) Aggregate demand shifts to the right,which increases inflation and decreases unemployment in the short run.

Question 12

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply,then in the short run the Federal Reserve's action

Accepted Answer

A) lowers both inflation and unemployment. 
B) lowers inflation but raises unemployment. 
C) raises inflation but lowers unemployment. 
D) raises both inflation and unemployment. 
A) lowers both inflation and unemployment. 
B) lowers inflation but raises unemployment. 
C) raises inflation but lowers unemployment. 
D) raises both inflation and unemployment.

Question 13

A shock increases the costs of production.Given the effects of this shock,if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A) increase the rate at which the money supply increases.This will also move inflation closer to its previous rate.. 
B) increase the rate at which the money supply increases.However,this will make inflation higher than its previous rate 
C) decrease the rate at which the money supply increases.This will also move inflation closer to its original rate 
D) decrease the rate at which the money supply increases.However,this will make higher than its previous rate. 
A) increase the rate at which the money supply increases.This will also move inflation closer to its previous rate.. 
B) increase the rate at which the money supply increases.However,this will make inflation higher than its previous rate 
C) decrease the rate at which the money supply increases.This will also move inflation closer to its original rate 
D) decrease the rate at which the money supply increases.However,this will make higher than its previous rate.

Question 14

In 1980,the U.S.misery index was

Accepted Answer

A) much higher than average. 
B) slightly higher than average. 
C) about average. 
D) below average. 
A) much higher than average. 
B) slightly higher than average. 
C) about average. 
D) below average.

Question 15

Which of the following would cause the price level to fall and output to rise in the short run?

Accepted Answer

A) an increase in the money supply 
B) a decrease in the money supply 
C) an adverse supply shock 
D) a favorable supply shock 
A) an increase in the money supply 
B) a decrease in the money supply 
C) an adverse supply shock 
D) a favorable supply shock

Question 16

If a central bank decreases the money supply in response to an adverse supply shock,then which of the following quantities moves closer to its pre-shock value as a result?

Accepted Answer

A) both the price level and output 
B) the price level but not output 
C) output but not the price level 
D) neither output nor the price level 
A) both the price level and output 
B) the price level but not output 
C) output but not the price level 
D) neither output nor the price level

Question 17

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate."    
-Refer to Figure 35-9.The shift of the aggregate-supply curve from AS1 to AS2 could be a consequence of

Accepted Answer

A) an increase in the money supply. 
B) an adverse supply shock. 
C) a decrease of output from Y1 to Y2. 
D) a slow adjustment of people's expectation of the inflation rate. 
A) an increase in the money supply. 
B) an adverse supply shock. 
C) a decrease of output from Y1 to Y2. 
D) a slow adjustment of people's expectation of the inflation rate.

Question 18

There is an adverse supply shock.In response the Federal Reserve pursues an expansionary monetary policy.Taking into account both the shock and the Federal Reserve's policy,which of the following are we sure of?

Accepted Answer

A) unemployment will be higher 
B) unemployment will be lower 
C) inflation will be higher 
D) inflation will be lower 
A) unemployment will be higher 
B) unemployment will be lower 
C) inflation will be higher 
D) inflation will be lower

Question 19

An adverse supply shock will cause output

Accepted Answer

A) and prices to rise. 
B) and prices to fall. 
C) to rise and prices to fall. 
D) to fall and prices to rise. 
A) and prices to rise. 
B) and prices to fall. 
C) to rise and prices to fall. 
D) to fall and prices to rise.

Question 20

In the United States during the 1970s,expected inflation

Accepted Answer

A) rose substantially. 
B) rose slightly. 
C) fell slightly. 
D) fell substantially. 
A) rose substantially. 
B) rose slightly. 
C) fell slightly. 
D) fell substantially.

Exam 22: The Short Run Trade Off Between Inflation and Unemployment: Shifts in the Phillips Curve the Role of Supply Shocks

A favorable supply shock will cause inflation to

An adverse supply shock causes output to

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 35-9.What is measured along the horizontal axis of the right-hand graph?

Which of the following is correct if there is an adverse supply shock?

If there is an increase in the price of oil,then

If the Fed wants to reverse the effects of a favorable supply shock on unemployment,it should

In the 1970's the Federal Reserve responded to an adverse supply shock.Its policy made

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops.The good weather would

The large increase in oil prices in the 1970s was caused primarily by a(n)

In response to an adverse supply shock,suppose the Fed implements accommodating monetary policy.Which of the following occurs as a result of the accommodating monetary policy?

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply,then in the short run the Federal Reserve's action

A shock increases the costs of production.Given the effects of this shock,if the central bank wants to return the unemployment rate towards its previous level it would

In 1980,the U.S.misery index was

Which of the following would cause the price level to fall and output to rise in the short run?

If a central bank decreases the money supply in response to an adverse supply shock,then which of the following quantities moves closer to its pre-shock value as a result?

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 35-9.The shift of the aggregate-supply curve from AS1 to AS2 could be a consequence of

There is an adverse supply shock.In response the Federal Reserve pursues an expansionary monetary policy.Taking into account both the shock and the Federal Reserve's policy,which of the following are we sure of?

An adverse supply shock will cause output

In the United States during the 1970s,expected inflation

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 35-9.The shift of the aggregate-supply curve from AS₁ to AS₂ could be a consequence of