Question 1

Disinflation is defined as a

Accepted Answer

A)  zero rate of inflation. 
B)  constant rate of inflation. 
C)  reduction in the rate of inflation. 
D)  negative rate of inflation. 
A)  zero rate of inflation. 
B)  constant rate of inflation. 
C)  reduction in the rate of inflation. 
D)  negative rate of inflation.

Question 2

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is vertical?

Accepted Answer

A)  both the long-run Phillips curve and the long-run aggregate supply curve 
B)  neither the long-run Phillips curve nor the long-run aggregate supply curve 
C)  the long-run Phillips curve, but not the long-run aggregate supply curv 
D)  the long-run Phillips curve, but not the long-run aggregate supply curve 
A)  both the long-run Phillips curve and the long-run aggregate supply curve 
B)  neither the long-run Phillips curve nor the long-run aggregate supply curve 
C)  the long-run Phillips curve, but not the long-run aggregate supply curv 
D)  the long-run Phillips curve, but not the long-run aggregate supply curve

Question 4

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is

Accepted Answer

A)  5/2. 
B)  3/2. 
C)  2/3. 
D)  2/5. 
A)  5/2. 
B)  3/2. 
C)  2/3. 
D)  2/5.

Question 5

If policymakers decrease aggregate demand, then in the short run the price level

Accepted Answer

A)  falls and unemployment rises. 
B)  and unemployment fall. 
C)  and unemployment rise. 
D)  rises and unemployment falls. 
A)  falls and unemployment rises. 
B)  and unemployment fall. 
C)  and unemployment rise. 
D)  rises and unemployment falls.

Question 6

The long-run response to a decrease in the money supply growth rate is shown by shifting

Accepted Answer

A)  the short-run and long-run Phillips curves left. 
B)  the short-run and long-run Phillips curves right. 
C)  only the short-run Phillips curve left. 
D)  only the short-run Phillips curve right. 
A)  the short-run and long-run Phillips curves left. 
B)  the short-run and long-run Phillips curves right. 
C)  only the short-run Phillips curve left. 
D)  only the short-run Phillips curve right.

Question 7

The short-run Phillips curve is based on the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 8

Most economists believe that a tradeoff between inflation and unemployment exists

Accepted Answer

A)  only in the short run. 
B)  only in the long run. 
C)  in both the short and long run. 
D)  in neither the short nor long run. 
A)  only in the short run. 
B)  only in the long run. 
C)  in both the short and long run. 
D)  in neither the short nor long run.

Question 9

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Accepted Answer

A)  both inflation and the unemployment rate are higher than they were prior to the change in policy. 
B)  inflation is higher and the unemployment rate is the same as it was prior to the change in policy. 
C)  inflation is lower and the unemployment rate is lower than it was prior to the change in policy. 
D)  inflation is lower and unemployment is the same as it was prior to the change in policy. 
A)  both inflation and the unemployment rate are higher than they were prior to the change in policy. 
B)  inflation is higher and the unemployment rate is the same as it was prior to the change in policy. 
C)  inflation is lower and the unemployment rate is lower than it was prior to the change in policy. 
D)  inflation is lower and unemployment is the same as it was prior to the change in policy.

Question 10

Friedman and Phelps argued that

Accepted Answer

A)  if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. 
B)  if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D)  None of the above is correct. 
A)  if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. 
B)  if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. 
C)  any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. 
D)  None of the above is correct.

Question 11

If inflation is greater than expected, then the unemployment rate is

Accepted Answer

A)  above the natural rate. In the long run the short-run Phillips curve will shift right. 
B)  above the natural rate. In the long run the short-run Phillips curve will shift left. 
C)  below the natural rate. In the long run the short-run Phillips curve will shift right. 
D)  below the natural rate. In the long run the short-run Phillips curve will shift left. 
A)  above the natural rate. In the long run the short-run Phillips curve will shift right. 
B)  above the natural rate. In the long run the short-run Phillips curve will shift left. 
C)  below the natural rate. In the long run the short-run Phillips curve will shift right. 
D)  below the natural rate. In the long run the short-run Phillips curve will shift left.

Question 12

Figure 17-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate.
  
-Refer to Figure 17-1. The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Accepted Answer

A)  that applies both in the short run and in the long run. 
B)  that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. 
C)  of inflation and unemployment. 
D)  All of the above are correct. 
A)  that applies both in the short run and in the long run. 
B)  that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. 
C)  of inflation and unemployment. 
D)  All of the above are correct.

Question 13

Disinflation is a reduction in

Accepted Answer

A)  the price level. 
B)  the inflation rate. 
C)  the consumer price index. 
D)  All of the above are correct. 
A)  the price level. 
B)  the inflation rate. 
C)  the consumer price index. 
D)  All of the above are correct.

Question 14

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 15

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Accepted Answer

A)  have higher average inflation rates than the United States. 
B)  have long-run Phillips curves to the right of the United States'. 
C)  may have less generous unemployment compensation or lower minimum wages. 
D)  All of the above are consistent with the evidence on unemployment rates. 
A)  have higher average inflation rates than the United States. 
B)  have long-run Phillips curves to the right of the United States'. 
C)  may have less generous unemployment compensation or lower minimum wages. 
D)  All of the above are consistent with the evidence on unemployment rates.

Question 16

According to Friedman and Phelps, the unemployment rate

Accepted Answer

A)  is never below its natural rate. 
B)  is below its natural rate when actual inflation is greater than expected inflation. 
C)  is below its natural rate when actual inflation is less than expected inflation. 
D)  is below its natural rate when actual inflation equals expected inflation. 
A)  is never below its natural rate. 
B)  is below its natural rate when actual inflation is greater than expected inflation. 
C)  is below its natural rate when actual inflation is less than expected inflation. 
D)  is below its natural rate when actual inflation equals expected inflation.

Question 17

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

Accepted Answer

A)  unemployment and inflation are higher. 
B)  unemployment and inflation are lower. 
C)  unemployment is higher and inflation is lower. 
D)  unemployment is lower and inflation is higher. 
A)  unemployment and inflation are higher. 
B)  unemployment and inflation are lower. 
C)  unemployment is higher and inflation is lower. 
D)  unemployment is lower and inflation is higher.

Question 18

In the nineteenth century, some countries were on a gold standard so that on average the money supply growth rate was close to zero and expected inflation was more or less constant. For these countries during this time period, we find that increases in actual inflation were generally associated with falling unemployment. These findings

Accepted Answer

A)  are consistent with Friedman and Phelps's theories, because they argued that when inflation was higher than expected, unemployment would fall. 
B)  are consistent with Friedman and Phelps's theories, because they argued that when prices rose unemployment would fall whether actual inflation was higher than expected or not. 
C)  are inconsistent with Friedman and Phelps's theories, because they argued that higher inflation would increase unemployment. 
D)  are inconsistent with Friedman and Phelps's theories, because they argued that inflation and unemployment are unrelated. 
A)  are consistent with Friedman and Phelps's theories, because they argued that when inflation was higher than expected, unemployment would fall. 
B)  are consistent with Friedman and Phelps's theories, because they argued that when prices rose unemployment would fall whether actual inflation was higher than expected or not. 
C)  are inconsistent with Friedman and Phelps's theories, because they argued that higher inflation would increase unemployment. 
D)  are inconsistent with Friedman and Phelps's theories, because they argued that inflation and unemployment are unrelated.

Question 19

There is a

Accepted Answer

A)  short-run tradeoff between inflation and unemployment. 
B)  short-run tradeoff between the actual unemployment rate and the natural rate of unemployment. 
C)  long-run tradeoff between inflation and unemployment. 
D)  long-run tradeoff between the actual unemployment rate and the natural rate of unemployment. 
A)  short-run tradeoff between inflation and unemployment. 
B)  short-run tradeoff between the actual unemployment rate and the natural rate of unemployment. 
C)  long-run tradeoff between inflation and unemployment. 
D)  long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.

Question 20

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

Accepted Answer

A)  the long run and the short run. 
B)  the long run but not the short run. 
C)  the short run but not the long run. 
D)  neither the short run nor the long run. 
A)  the long run and the short run. 
B)  the long run but not the short run. 
C)  the short run but not the long run. 
D)  neither the short run nor the long run.

Disinflation is defined as a

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Which of the following is vertical?

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is

If policymakers decrease aggregate demand, then in the short run the price level

The long-run response to a decrease in the money supply growth rate is shown by shifting

The short-run Phillips curve is based on the classical dichotomy.

Most economists believe that a tradeoff between inflation and unemployment exists

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Friedman and Phelps argued that

If inflation is greater than expected, then the unemployment rate is

Figure 17-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 17-1. The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations

Disinflation is a reduction in

Neither monetary policy nor any government policy can change the natural rate of unemployment.

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

According to Friedman and Phelps, the unemployment rate

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

There is a

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

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Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

Disinflation is defined as a

In the long run people come to expect whatever inflation rate the Fed chooses to produce, so unemployment returns to its natural rate.

Which of the following is vertical?

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is

If policymakers decrease aggregate demand, then in the short run the price level

The long-run response to a decrease in the money supply growth rate is shown by shifting

The short-run Phillips curve is based on the classical dichotomy.

Most economists believe that a tradeoff between inflation and unemployment exists

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Friedman and Phelps argued that

If inflation is greater than expected, then the unemployment rate is

Disinflation is a reduction in

Neither monetary policy nor any government policy can change the natural rate of unemployment.

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

According to Friedman and Phelps, the unemployment rate

As the aggregate demand curve shifts rightward along a given aggregate supply curve,

There is a

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Six Debates Over Macroeconomic Policy

Filters