Question 1

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 2

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. Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

Accepted Answer

A)  a reduction in firms' costs of production 
B)  a reduction in taxes on consumers 
C)  an increase in the price level 
D)  an increase in the world price of oil 
A)  a reduction in firms' costs of production 
B)  a reduction in taxes on consumers 
C)  an increase in the price level 
D)  an increase in the world price of oil

Question 3

Monetary Policy in Flosserland
In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%. Suppose that the public had expected that the Department of Finance would reduce inflation, but only to 20%. Then

Accepted Answer

A)  unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation. 
B)  unemployment falls, but it would have fallen more if people had been expecting 22% inflation. 
C)  unemployment rises, but it would have risen more if people had been expecting 12.5% inflation. 
D)  unemployment rises, but it would have risen more if people had been expecting 22% inflation. 
A)  unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation. 
B)  unemployment falls, but it would have fallen more if people had been expecting 22% inflation. 
C)  unemployment rises, but it would have risen more if people had been expecting 12.5% inflation. 
D)  unemployment rises, but it would have risen more if people had been expecting 22% inflation.

Question 4

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Accepted Answer

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

Question 5

If an increase in inflation permanently reduced unemployment, then

Accepted Answer

A)  money would not be neutral and the long-run Phillips curve would slope upward. 
B)  money would not be neutral and the long-run Phillips curve would slope downward. 
C)  money would be neutral and the long-run Phillips curve would slope upward. 
D)  money would be neutral and the long-run Phillips curve would slope downward. 
A)  money would not be neutral and the long-run Phillips curve would slope upward. 
B)  money would not be neutral and the long-run Phillips curve would slope downward. 
C)  money would be neutral and the long-run Phillips curve would slope upward. 
D)  money would be neutral and the long-run Phillips curve would slope downward.

Question 6

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Accepted Answer

The econom

Question 7

In the long run, which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in government spending 
C)  an increase in the money supply 
D)  a decrease in the money supply 
A)  an increase in the minimum wage 
B)  an increase in government spending 
C)  an increase in the money supply 
D)  a decrease in the money supply

Question 8

According to classical macroeconomic theory, in the long run

Accepted Answer

A)  monetary growth affects both real and nominal variables. 
B)  the only real variable affected by monetary growth is the unemployment rate. 
C)  a number of factors that affect unemployment are influenced by monetary growth. 
D)  monetary growth affects nominal but not real variables. 
A)  monetary growth affects both real and nominal variables. 
B)  the only real variable affected by monetary growth is the unemployment rate. 
C)  a number of factors that affect unemployment are influenced by monetary growth. 
D)  monetary growth affects nominal but not real variables.

Question 9

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

Accepted Answer

A)  consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation. 
B)  consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation. 
C)  inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation. 
D)  inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation. 
A)  consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation. 
B)  consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation. 
C)  inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation. 
D)  inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation.

Question 10

A favorable supply shock shifts the short-run Phillips curve

Accepted Answer

A)  right and inflation rises. 
B)  right and inflation falls. 
C)  left and inflation rises. 
D)  left and inflation falls. 
A)  right and inflation rises. 
B)  right and inflation falls. 
C)  left and inflation rises. 
D)  left and inflation falls.

Question 11

What is meant by accommodation?

Accepted Answer

A central bank is said to acco

Question 12

Figure 35-6
Use the graph below to answer the following questions.  
-Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Accepted Answer

A)  stays at C. 
B)  moves to B. 
C)  moves to F. 
D)  None of the above is consistent wit an increase in the money supply growth rate. 
A)  stays at C. 
B)  moves to B. 
C)  moves to F. 
D)  None of the above is consistent wit an increase in the money supply growth rate.

Question 13

Suppose that the money supply increases. In the short run, this increases prices according to

Accepted Answer

A)  both the short-run Phillips curve and the aggregate demand and aggregate supply model. 
B)  neither the short-run Phillips curve nor the aggregate demand and aggregate supply model. 
C)  the short-run Phillips curve, but not according to the aggregate demand and aggregate supply model. 
D)  the aggregate demand and aggregate supply model but not according to the short-run Phillips curve. 
A)  both the short-run Phillips curve and the aggregate demand and aggregate supply model. 
B)  neither the short-run Phillips curve nor the aggregate demand and aggregate supply model. 
C)  the short-run Phillips curve, but not according to the aggregate demand and aggregate supply model. 
D)  the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.

Question 14

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Accepted Answer

A)  is greater than expected inflation. 
B)  is less than expected inflation. 
C)  equals expected inflation. 
D)  low whether its greater than or less than expected. 
A)  is greater than expected inflation. 
B)  is less than expected inflation. 
C)  equals expected inflation. 
D)  low whether its greater than or less than expected.

Question 15

What does the natural-rate hypothesis claim?

Accepted Answer

That eventually unem

Question 16

In the long run, inflation

Accepted Answer

A)  and unemployment are primarily determined by labor market factors. 
B)  and unemployment are primarily determined by the rate of money supply growth. 
C)  is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors. 
D)  is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth. 
A)  and unemployment are primarily determined by labor market factors. 
B)  and unemployment are primarily determined by the rate of money supply growth. 
C)  is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors. 
D)  is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.

Question 17

The long-run response to an increase in the growth rate of the money supply 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 18

Which of the following would cause the price level to rise and output to fall 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 19

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

Accepted Answer

A)  established a lot of credibility in its commitment to keep inflation at about 2 percent. 
B)  established a lot of credibility in its commitment to keep inflation at about 5 percent. 
C)  failed to establish significant credibility in its announced intent to keep inflation at about 2 percent. 
D)  failed to establish significant credibility in its announced intent to keep inflation at about 5 percent. 
A)  established a lot of credibility in its commitment to keep inflation at about 2 percent. 
B)  established a lot of credibility in its commitment to keep inflation at about 5 percent. 
C)  failed to establish significant credibility in its announced intent to keep inflation at about 2 percent. 
D)  failed to establish significant credibility in its announced intent to keep inflation at about 5 percent.

Question 20

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

Accepted Answer

A)  Inflation expectations rise which shifts the short-run Phillips curve to the right. 
B)  Inflation expectations rise which shifts the short-run Phillips curve to the left. 
C)  Inflation expectations fall which shifts the short-run Phillips curve to the right. 
D)  Inflation expectations fall which shifts the short-run Phillips curve to the left. 
A)  Inflation expectations rise which shifts the short-run Phillips curve to the right. 
B)  Inflation expectations rise which shifts the short-run Phillips curve to the left. 
C)  Inflation expectations fall which shifts the short-run Phillips curve to the right. 
D)  Inflation expectations fall which shifts the short-run Phillips curve to the left.

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

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

If an increase in inflation permanently reduced unemployment, then

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

In the long run, which of the following would shift the long-run Phillips curve to the right?

According to classical macroeconomic theory, in the long run

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

A favorable supply shock shifts the short-run Phillips curve

What is meant by accommodation?

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Suppose that the money supply increases. In the short run, this increases prices according to

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

What does the natural-rate hypothesis claim?

In the long run, inflation

The long-run response to an increase in the growth rate of the money supply is shown by shifting

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

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

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 and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

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 Tradeoff Between Inflation and Unemployment

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

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

If an increase in inflation permanently reduced unemployment, then

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

In the long run, which of the following would shift the long-run Phillips curve to the right?

According to classical macroeconomic theory, in the long run

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is

A favorable supply shock shifts the short-run Phillips curve

What is meant by accommodation?

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Suppose that the money supply increases. In the short run, this increases prices according to

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

What does the natural-rate hypothesis claim?

In the long run, inflation

The long-run response to an increase in the growth rate of the money supply is shown by shifting

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

A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and 2010 is that, over the previous 20 or so years, the Federal Reserve had

If unemployment is below its natural rate, what happens to move the economy to long-run equilibrium?

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 and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

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