Question 1

According to the Phillips curve, policymakers can reduce inflation by

Accepted Answer

A)  contracting aggregate demand. This contraction results in a temporarily higher unemployment rate. 
B)  contracting aggregate demand. This contraction results in a temporarily lower unemployment rate. 
C)  expanding aggregate demand. This expansion results in a temporarily lower unemployment rate. 
D)  expanding aggregate demand. This expansion results in a temporarily higher unemployment rate. 
A)  contracting aggregate demand. This contraction results in a temporarily higher unemployment rate. 
B)  contracting aggregate demand. This contraction results in a temporarily lower unemployment rate. 
C)  expanding aggregate demand. This expansion results in a temporarily lower unemployment rate. 
D)  expanding aggregate demand. This expansion results in a temporarily higher unemployment rate. A

Question 2

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 D

Question 3

If the central bank increases the money supply, in the short run, output

Accepted Answer

A)  rises so unemployment rises. 
B)  rises so unemployment falls. 
C)  falls so unemployment rises. 
D)  falls so unemployment falls. 
A)  rises so unemployment rises. 
B)  rises so unemployment falls. 
C)  falls so unemployment rises. 
D)  falls so unemployment falls. B

Question 4

Samuelson and Solow argued that

Accepted Answer

A)  high unemployment puts upward pressures on wages and prices. 
B)  given the historical evidence, a combination of low inflation and low unemployment was not possible. 
C)  Both A and B are correct. 
D)  None of the above are correct. 
A)  high unemployment puts upward pressures on wages and prices. 
B)  given the historical evidence, a combination of low inflation and low unemployment was not possible. 
C)  Both A and B are correct. 
D)  None of the above are correct.

Question 5

Suppose that the money supply decreases. 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 6

A decrease in expected inflation shifts

Accepted Answer

A)  the long-run Phillips curve left. 
B)  the short-run Phillips curve left. 
C)  neither the short-run nor long-run Phillips curve left. 
D)  both the short-run and long-run Phillips curve left. 
A)  the long-run Phillips curve left. 
B)  the short-run Phillips curve left. 
C)  neither the short-run nor long-run Phillips curve left. 
D)  both the short-run and long-run Phillips curve left.

Question 7

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is correct?

Accepted Answer

A)  In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated problems. 
B)  Inflation and unemployment are positively related in the short run and in the long run. 
C)  In the short run, unemployment and inflation are negatively related. In the long run they are largely unrelated problems. 
D)  Inflation and unemployment are negatively related in the short run and in the long run. 
A)  In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated problems. 
B)  Inflation and unemployment are positively related in the short run and in the long run. 
C)  In the short run, unemployment and inflation are negatively related. In the long run they are largely unrelated problems. 
D)  Inflation and unemployment are negatively related in the short run and in the long run.

Question 9

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

Accepted Answer

It would r

Question 10

A favorable supply shock will cause

Accepted Answer

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

Question 11

If a central bank increases the money supply growth rate, then in the short run

Accepted Answer

A)  unemployment rises. In the long run the short-run Phillips curve shifts right. 
B)  unemployment rises. In the long run the short-run Phillips curve shifts left. 
C)  unemployment falls. In the long run the short-run Phillips curve shifts right. 
D)  unemployment falls. In the long run the short-run Phillips curve shifts left. 
A)  unemployment rises. In the long run the short-run Phillips curve shifts right. 
B)  unemployment rises. In the long run the short-run Phillips curve shifts left. 
C)  unemployment falls. In the long run the short-run Phillips curve shifts right. 
D)  unemployment falls. In the long run the short-run Phillips curve shifts left.

Question 12

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Accepted Answer

A)  both the natural rate of unemployment and the inflation rate 
B)  the natural rate of unemployment, but not the inflation rate 
C)  the inflation rate, but not the natural rate of unemployment 
D)  neither the natural unemployment rate nor the inflation rate 
A)  both the natural rate of unemployment and the inflation rate 
B)  the natural rate of unemployment, but not the inflation rate 
C)  the inflation rate, but not the natural rate of unemployment 
D)  neither the natural unemployment rate nor the inflation rate

Question 13

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A)  both the inflation rate and the unemployment rate. 
B)  the inflation rate but not the unemployment rate. 
C)  the unemployment rate but not the inflation rate. 
D)  neither the unemployment rate nor the inflation rate. 
A)  both the inflation rate and the unemployment rate. 
B)  the inflation rate but not the unemployment rate. 
C)  the unemployment rate but not the inflation rate. 
D)  neither the unemployment rate nor the inflation rate.

Question 14

If the sacrifice ratio is 2, reducing the inflation rate from 4 percent to 2 percent would

Accepted Answer

A)  cost 1 percent of annual output. 
B)  cost 4 percent of annual output. 
C)  imply that unemployment would rise by 1%. 
D)  imply that unemployment would rise by 4%. 
A)  cost 1 percent of annual output. 
B)  cost 4 percent of annual output. 
C)  imply that unemployment would rise by 1%. 
D)  imply that unemployment would rise by 4%.

Question 15

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 16

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 17

If policymakers decrease aggregate demand, then in the long run

Accepted Answer

A)  prices will be lower and unemployment will be higher. 
B)  prices will be lower and unemployment will be unchanged. 
C)  prices and unemployment will be unchanged. 
D)  None of the above is correct. 
A)  prices will be lower and unemployment will be higher. 
B)  prices will be lower and unemployment will be unchanged. 
C)  prices and unemployment will be unchanged. 
D)  None of the above is correct.

Question 18

If there is an adverse supply shock, then

Accepted Answer

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

Question 19

The long-run Phillips curve would shift to the right if

Accepted Answer

A)  the money supply growth rate decreased or if labor markets become more flexible. 
B)  the money supply growth rate decreased, but not if labor markets become more flexible. 
C)  labor markets become more flexible, but not if the money supply growth rate decreased. 
D)  None of the above is correct. 
A)  the money supply growth rate decreased or if labor markets become more flexible. 
B)  the money supply growth rate decreased, but not if labor markets become more flexible. 
C)  labor markets become more flexible, but not if the money supply growth rate decreased. 
D)  None of the above is correct.

Question 20

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.

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

According to the Phillips curve, policymakers can reduce inflation by

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

If the central bank increases the money supply, in the short run, output

Samuelson and Solow argued that

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

A decrease in expected inflation shifts

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Which of the following statements is correct?

If there were a favorable supply shock and the central bank wanted to offset the change in the unemployment rate, what would it do?

A favorable supply shock will cause

If a central bank increases the money supply growth rate, then in the short run

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

According to the long-run Phillips curve, in the long run monetary policy influences

If the sacrifice ratio is 2, reducing the inflation rate from 4 percent to 2 percent would

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

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

If policymakers decrease aggregate demand, then in the long run

If there is an adverse supply shock, then

The long-run Phillips curve would shift to the right if

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 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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