Question 1

Which of the following would reduce the natural rate of unemployment?

Accepted Answer

A)  both an increase in the rate of money growth and increased unemployment compensation 
B)  an increase in the rate of money growth but not increased unemployment compensation 
C)  an increase in unemployment compensation but not an increase in the rate of money growth. 
D)  neither an increase in unemployment compensation nor an increase in the rate of money growth. 
A)  both an increase in the rate of money growth and increased unemployment compensation 
B)  an increase in the rate of money growth but not increased unemployment compensation 
C)  an increase in unemployment compensation but not an increase in the rate of money growth. 
D)  neither an increase in unemployment compensation nor an increase in the rate of money growth.

Question 2

If the central bank increases the money supply, then in the short run prices

Accepted Answer

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

Question 3

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

Accepted Answer

A)  short run, and the natural rate is constant over time. 
B)  long run, and the natural rate is constant over time. 
C)  short run, and the natural rate changes over time. 
D)  long run, and the natural rate changes over time. 
A)  short run, and the natural rate is constant over time. 
B)  long run, and the natural rate is constant over time. 
C)  short run, and the natural rate changes over time. 
D)  long run, and the natural rate changes over time.

Question 4

In the long run, an increase in the money supply

Accepted Answer

A)  leaves prices and unemployment unchanged. 
B)  raises prices and unemployment. 
C)  raises prices and leaves unemployment unchanged. 
D)  leaves prices unchanged and reduces unemployment. 
A)  leaves prices and unemployment unchanged. 
B)  raises prices and unemployment. 
C)  raises prices and leaves unemployment unchanged. 
D)  leaves prices unchanged and reduces unemployment.

Question 5

In the long run, if the Fed decreases the growth rate of the money supply,

Accepted Answer

A)  inflation will be lower. 
B)  unemployment will be higher. 
C)  real GDP will be lower. 
D)  All of the above are correct. 
A)  inflation will be lower. 
B)  unemployment will be higher. 
C)  real GDP will be lower. 
D)  All of the above are correct.

Question 6

Which of the following is not associated with an adverse supply shock?

Accepted Answer

A)  the short-run Phillips curve shifts left 
B)  unemployment rises 
C)  the price level rises 
D)  output falls 
A)  the short-run Phillips curve shifts left 
B)  unemployment rises 
C)  the price level rises 
D)  output falls

Question 7

If the central bank increases the money supply, in the short run, the price level

Accepted Answer

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

Question 8

If the minimum wage increased, then at any given rate of inflation

Accepted Answer

A)  both output and employment would be higher. 
B)  neither output nor employment would be higher. 
C)  output would be higher and unemployment would be lower. 
D)  output would be lower and unemployment would be higher. 
A)  both output and employment would be higher. 
B)  neither output nor employment would be higher. 
C)  output would be higher and unemployment would be lower. 
D)  output would be lower and unemployment would be higher.

Question 9

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

Accepted Answer

A steeper Phillips c

Question 10

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 11

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Accepted Answer

Both reflect the classical dichotomy. Th

Question 12

Moving from the late 1960s to 1970-1973,

Accepted Answer

A)  inflation remained high while the unemployment rate was lower than in the late 1960s. 
B)  inflation remained high while the unemployment rate was higher than in the late 1960s. 
C)  inflation remained low while the unemployment rate was lower than in the late 1960s. 
D)  inflation remained low while the unemployment rate was higher than in the late 1960s. 
A)  inflation remained high while the unemployment rate was lower than in the late 1960s. 
B)  inflation remained high while the unemployment rate was higher than in the late 1960s. 
C)  inflation remained low while the unemployment rate was lower than in the late 1960s. 
D)  inflation remained low while the unemployment rate was higher than in the late 1960s.

Question 13

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same, then policymakers

Accepted Answer

A)  can not exploit a tradeoff between inflation and unemployment in either the short or long run. 
B)  can exploit a tradeoff between inflation and unemployment in the short run but not in the long run. 
C)  can exploit a tradeoff between inflation and unemployment in both the short run and the long run. 
D)  can exploit a tradeoff between inflation and unemployment in the long run, but not the short run. 
A)  can not exploit a tradeoff between inflation and unemployment in either the short or long run. 
B)  can exploit a tradeoff between inflation and unemployment in the short run but not in the long run. 
C)  can exploit a tradeoff between inflation and unemployment in both the short run and the long run. 
D)  can exploit a tradeoff between inflation and unemployment in the long run, but not the short run.

Question 14

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)  the unemployment rate will be below its natural rate whenever inflation is negative. 
B)  the unemployment rate will be below its natural rate whenever inflation is positive. 
C)  the unemployment rate will be below its natural rate only if inflation is less than expected. 
D)  the unemployment rate will be below its natural rate only if inflation is greater than expected. 
A)  the unemployment rate will be below its natural rate whenever inflation is negative. 
B)  the unemployment rate will be below its natural rate whenever inflation is positive. 
C)  the unemployment rate will be below its natural rate only if inflation is less than expected. 
D)  the unemployment rate will be below its natural rate only if inflation is greater than expected.

Question 15

In 1979, Fed chair Paul Volcker decided to pursue a policy

Accepted Answer

A)  that would lead to disinflation. 
B)  that would create falling prices. 
C)  to accommodate continuing adverse supply shocks. 
D)  that maintained money growth at its current level. 
A)  that would lead to disinflation. 
B)  that would create falling prices. 
C)  to accommodate continuing adverse supply shocks. 
D)  that maintained money growth at its current level.

Question 16

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

Accepted Answer

A)  low, so there was upward pressure on wages and prices. 
B)  low, so there was downward pressure on wages and prices. 
C)  high, so there was upward pressure on wages and prices. 
D)  high, so there was downward pressure on wages and prices. 
A)  low, so there was upward pressure on wages and prices. 
B)  low, so there was downward pressure on wages and prices. 
C)  high, so there was upward pressure on wages and prices. 
D)  high, so there was downward pressure on wages and prices.

Question 17

The restrictive monetary policy followed by the Fed in the early 1980s

Accepted Answer

A)  reduced both unemployment and inflation. 
B)  reduced inflation significantly, but at the cost of a severe recession. 
C)  reduced unemployment significantly, but at the cost of higher inflation. 
D)  raised both unemployment and inflation. 
A)  reduced both unemployment and inflation. 
B)  reduced inflation significantly, but at the cost of a severe recession. 
C)  reduced unemployment significantly, but at the cost of higher inflation. 
D)  raised both unemployment and inflation.

Question 18

Figure 35-2
Use the pair of diagrams below to answer the following questions.    
-Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves the economy to

Accepted Answer

A)  E and 1. 
B)  D and 2. 
C)  D and 3. 
D)  None of the above is correct. 
A)  E and 1. 
B)  D and 2. 
C)  D and 3. 
D)  None of the above is correct.

Question 19

Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.    
-Refer to Figure 35-3. Assume the figure depicts possible outcomes for the year 2018. In 2018, the economy is at point A on the left-hand graph, which corresponds to point A on the right-hand graph. The price level in the year 2017 was

Accepted Answer

A)  144. 
B)  150. 
C)  152. 
D)  156. 
A)  144. 
B)  150. 
C)  152. 
D)  156.

Question 20

Figure 35-8
Use this graph to answer the questions below.  
-Refer to figure 35-8. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A)  7% unemployment and 1% inflation 
B)  7% unemployment and 3% inflation 
C)  3% unemployment and 5% inflation 
D)  3% unemployment and 7% inflation 
A)  7% unemployment and 1% inflation 
B)  7% unemployment and 3% inflation 
C)  3% unemployment and 5% inflation 
D)  3% unemployment and 7% inflation

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

Which of the following would reduce the natural rate of unemployment?

If the central bank increases the money supply, then in the short run prices

The "natural" rate of unemployment is the unemployment rate toward which the economy gravitates in the

In the long run, an increase in the money supply

In the long run, if the Fed decreases the growth rate of the money supply,

Which of the following is not associated with an adverse supply shock?

If the central bank increases the money supply, in the short run, the price level

If the minimum wage increased, then at any given rate of inflation

Does a more steeply sloped Phillips curve make the sacrifice ratio smaller or larger than otherwise?

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?

Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

Moving from the late 1960s to 1970-1973,

If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same, then policymakers

According to Friedman and Phelps's analysis of the Phillips curve,

In 1979, Fed chair Paul Volcker decided to pursue a policy

Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

The restrictive monetary policy followed by the Fed in the early 1980s

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves the economy to

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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