Question 1

Which of the following is an example of 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 2

An increase in the price of oil shifts the

Accepted Answer

A) short-run Phillips curve right and the unemployment rate rises. 
B) short-run Phillips curve right and the unemployment rate falls. 
C) short-run Phillips curve left and the unemployment rate rises. 
D) short-run Phillips curve left and the unemployment rate falls. 
A) short-run Phillips curve right and the unemployment rate rises. 
B) short-run Phillips curve right and the unemployment rate falls. 
C) short-run Phillips curve left and the unemployment rate rises. 
D) short-run Phillips curve left and the unemployment rate falls.

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.A significant increase in the world price of oil could explain

Accepted Answer

A) the shift of the aggregate-supply curve from AS1 to AS2,but it could not explain the shift of the Phillips curve from PC1 to PC2. 
B) the shift of the Phillips curve from PC1 to PC2,but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. 
C) both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. 
D) neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2. 
A) the shift of the aggregate-supply curve from AS1 to AS2,but it could not explain the shift of the Phillips curve from PC1 to PC2. 
B) the shift of the Phillips curve from PC1 to PC2,but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. 
C) both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. 
D) neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2.

Question 4

An adverse supply shock will shift short-run aggregate supply

Accepted Answer

A) right,making prices rise. 
B) left,making prices rise. 
C) right,making prices fall. 
D) left,making prices fall. 
A) right,making prices rise. 
B) left,making prices rise. 
C) right,making prices fall. 
D) left,making prices fall.

Question 5

A favorable supply shock will cause the price level

Accepted Answer

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

Question 6

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.Subsequent to the shift of the Phillips curve from PC1 to PC2,the curve will soon shift back to PC1 if people perceive the

Accepted Answer

A) increase in the inflation rate as a temporary aberration. 
B) economic boom as a temporary aberration. 
C) increase in the inflation rate as a sign of a new era of higher inflation. 
D) economic boom as a sign of a new era of higher economic growth. 
A) increase in the inflation rate as a temporary aberration. 
B) economic boom as a temporary aberration. 
C) increase in the inflation rate as a sign of a new era of higher inflation. 
D) economic boom as a sign of a new era of higher economic growth.

Question 7

In 1980,the combination of inflation and unemployment the U.S.was experiencing

Accepted Answer

A) resulted from a leftward shift of the short-run Phillips curve. 
B) was consistent with feasible inflation-unemployment combinations provided by the Phillips curve of the 1960s. 
C) followed two supply shocks that were triggered by the Organization of Petroleum Exporting Countries. 
D) All of the above are correct. 
A) resulted from a leftward shift of the short-run Phillips curve. 
B) was consistent with feasible inflation-unemployment combinations provided by the Phillips curve of the 1960s. 
C) followed two supply shocks that were triggered by the Organization of Petroleum Exporting Countries. 
D) All of the above are correct.

Question 8

Which of the following shifts aggregate supply to the right?

Accepted Answer

A) a decline in the price of imported natural resources 
B) a technological advance 
C) an older labor force that leaves jobs less frequently 
D) All of the above are correct. 
A) a decline in the price of imported natural resources 
B) a technological advance 
C) an older labor force that leaves jobs less frequently 
D) All of the above are correct.

Question 9

After an oil price shock,which of the following would move unemployment back towards its natural rate?

Accepted Answer

A) the Fed sells bonds 
B) the government raises taxes 
C) the government increases expenditures 
D) All of the above are correct. 
A) the Fed sells bonds 
B) the government raises taxes 
C) the government increases expenditures 
D) All of the above are correct.

Question 10

In which case,if any,will inflation remain higher after a temporary adverse supply shock?

Accepted Answer

A) both when the central bank maintains a higher money supply growth rate and when the central bank does nothing 
B) only if the central bank does nothing 
C) only if the central bank maintains a higher money supply growth rate 
D) None of the above is correct.Whether the central bank maintains a higher money supply growth rate or not,the inflation rate will return to its original level. 
A) both when the central bank maintains a higher money supply growth rate and when the central bank does nothing 
B) only if the central bank does nothing 
C) only if the central bank maintains a higher money supply growth rate 
D) None of the above is correct.Whether the central bank maintains a higher money supply growth rate or not,the inflation rate will return to its original level.

Question 11

A favorable supply shock will shift short-run aggregate supply

Accepted Answer

A) left,making output rise. 
B) left,making output fall. 
C) right,making output rise. 
D) right,making output fall. 
A) left,making output rise. 
B) left,making output fall. 
C) right,making output rise. 
D) right,making output fall.

Question 12

An event that directly affects firms' costs of production and thus the prices they charge is called

Accepted Answer

A) a Phillips contraction. 
B) an inflationary spiral. 
C) a demand shock. 
D) a supply shock. 
A) a Phillips contraction. 
B) an inflationary spiral. 
C) a demand shock. 
D) a supply shock.

Question 13

If policymakers accommodate an adverse supply shock,then in the short run the unemployment rate

Accepted Answer

A) and the inflation rate rise. 
B) and the inflation rate fall. 
C) rises and the inflation rate falls. 
D) falls and the inflation rate rises. 
A) and the inflation rate rise. 
B) and the inflation rate fall. 
C) rises and the inflation rate falls. 
D) falls and the inflation rate rises.

Question 14

A favorable supply shock

Accepted Answer

A) raises unemployment and the inflation rate. 
B) raises unemployment and reduces the inflation rate. 
C) reduces unemployment and raises the inflation rate. 
D) reduces unemployment and the inflation rate. 
A) raises unemployment and the inflation rate. 
B) raises unemployment and reduces the inflation rate. 
C) reduces unemployment and raises the inflation rate. 
D) reduces unemployment and the inflation rate.

Question 15

Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops.Which of the following would you expect to occur as a result of this favorable supply shock?

Accepted Answer

A) The short-run Phillips curve will shift to the right and the unemployment rate will increase. 
B) The short-run Phillips curve will shift to the right and the unemployment rate will decrease. 
C) The short-run Phillips curve will shift to the left and the unemployment rate will increase. 
D) The short-run Phillips curve will shift to the left and the unemployment rate will decrease. 
A) The short-run Phillips curve will shift to the right and the unemployment rate will increase. 
B) The short-run Phillips curve will shift to the right and the unemployment rate will decrease. 
C) The short-run Phillips curve will shift to the left and the unemployment rate will increase. 
D) The short-run Phillips curve will shift to the left and the unemployment rate will decrease.

Question 16

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

Accepted Answer

A) results in a more favorable trade-off between inflation and unemployment. 
B) results in a more favorable trade-off between inflation and the growth rate of real GDP. 
C) represents an adverse shock to aggregate supply. 
D) represents a favorable shock to aggregate supply. 
A) results in a more favorable trade-off between inflation and unemployment. 
B) results in a more favorable trade-off between inflation and the growth rate of real GDP. 
C) represents an adverse shock to aggregate supply. 
D) represents a favorable shock to aggregate supply.

Question 17

If there is a temporary adverse supply shock,then the short-run Phillips curve shifts to the

Accepted Answer

A) right.It remains to the right regardless of monetary policy. 
B) right.It remains to the right if the central bank pursues expansionary monetary policy. 
C) left.It remains to the left regardless of monetary policy. 
D) left.It remains to the left if the central bank pursues expansionary monetary policy. 
A) right.It remains to the right regardless of monetary policy. 
B) right.It remains to the right if the central bank pursues expansionary monetary policy. 
C) left.It remains to the left regardless of monetary policy. 
D) left.It remains to the left if the central bank pursues expansionary monetary policy.

Question 18

If the Fed wants to reverse the effects of an adverse 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 19

In 1980,the U.S.economy had an inflation rate of

Accepted Answer

A) about 1 percent and an unemployment rate of about 7 percent. 
B) less than 4 percent and an unemployment rate of less than 6 percent. 
C) less than 7 percent and an unemployment rate of about 9 percent. 
D) more than 9 percent and an unemployment rate of about 7 percent. 
A) about 1 percent and an unemployment rate of about 7 percent. 
B) less than 4 percent and an unemployment rate of less than 6 percent. 
C) less than 7 percent and an unemployment rate of about 9 percent. 
D) more than 9 percent and an unemployment rate of about 7 percent.

Question 20

Which of the following results in higher inflation and higher unemployment in the short run?

Accepted Answer

A) a more expansionary monetary policy 
B) a more contractionary monetary policy 
C) a decrease in the minimum wage 
D) an adverse supply shock such as an increase in the price of oil 
A) a more expansionary monetary policy 
B) a more contractionary monetary policy 
C) a decrease in the minimum wage 
D) an adverse supply shock such as an increase in the price of oil

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

Which of the following is an example of an adverse supply shock?

An increase in the price of oil shifts the

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 significant increase in the world price of oil could explain

An adverse supply shock will shift short-run aggregate supply

A favorable supply shock will cause the price level

In 1980,the combination of inflation and unemployment the U.S.was experiencing

Which of the following shifts aggregate supply to the right?

After an oil price shock,which of the following would move unemployment back towards its natural rate?

In which case,if any,will inflation remain higher after a temporary adverse supply shock?

A favorable supply shock will shift short-run aggregate supply

An event that directly affects firms' costs of production and thus the prices they charge is called

If policymakers accommodate an adverse supply shock,then in the short run the unemployment rate

A favorable supply shock

Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops.Which of the following would you expect to occur as a result of this favorable supply shock?

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

If there is a temporary adverse supply shock,then the short-run Phillips curve shifts to the

If the Fed wants to reverse the effects of an adverse supply shock on unemployment,it should

In 1980,the U.S.economy had an inflation rate of

Which of the following results in higher inflation and higher unemployment in the short run?

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