Question 1

By raising aggregate demand more than anticipated, policymakers

Accepted Answer

A)  reduce unemployment for awhile. 
B)  raise unemployment for awhile. 
C)  reduce unemployment permanently. 
D)  None of the above is correct. 
A)  reduce unemployment for awhile. 
B)  raise unemployment for awhile. 
C)  reduce unemployment permanently. 
D)  None of the above is correct.

Question 2

Figure 35-1. 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 35-1. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to

Accepted Answer

A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph. 
A)  point A on the left-hand graph. 
B)  point B on the left-hand graph. 
C)  point C on the left-hand graph. 
D)  point D on the left-hand graph.

Question 3

If the unemployment rate is below the natural rate, then

Accepted Answer

A)  inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right. 
B)  inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
C)  inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
D)  inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right. 
A)  inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right. 
B)  inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
C)  inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left. 
D)  inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right.

Question 4

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Accepted Answer

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

Question 5

In the long run, if the Fed decreases the rate at which it increases the money supply,

Accepted Answer

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

Question 6

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 7

Contractionary monetary policy

Accepted Answer

A)  leads to disinflation and makes the short-run Phillips curve shift right. 
B)  leads to disinflation and makes the short-run Phillips curve shift left. 
C)  does not lead to disinflation but makes the short-run Phillips curve shift right. 
D)  does not lead to disinflation but makes the short-run Phillips curve shift left. 
A)  leads to disinflation and makes the short-run Phillips curve shift right. 
B)  leads to disinflation and makes the short-run Phillips curve shift left. 
C)  does not lead to disinflation but makes the short-run Phillips curve shift right. 
D)  does not lead to disinflation but makes the short-run Phillips curve shift left.

Question 8

Which of the following leads to a lower level of unemployment in the long run?

Accepted Answer

A)  both an increase in the size of the money supply and an increase in the money supply growth rate 
B)  an increase in the size of the money supply but not an increase in the money supply growth rate 
C)  an increase in the money supply growth rate, but not an increase in the size of the money supply 
D)  neither an increase in the size of the money supply nor an increase in the money supply growth rate 
A)  both an increase in the size of the money supply and an increase in the money supply growth rate 
B)  an increase in the size of the money supply but not an increase in the money supply growth rate 
C)  an increase in the money supply growth rate, but not an increase in the size of the money supply 
D)  neither an increase in the size of the money supply nor an increase in the money supply growth rate

Question 9

Figure 35-1. 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 35-1. The curve that is depicted on the right­hand 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 10

In the long run, policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level. 
B)  neither unemployment nor the price level. 
C)  only unemployment. 
D)  only the price level. 
A)  both unemployment and the price level. 
B)  neither unemployment nor the price level. 
C)  only unemployment. 
D)  only the price level.

Question 11

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 12

Samuelson and Solow argued that when unemployment is high,

Accepted Answer

A)  aggregate demand is high, which puts upward pressure on wages and prices. 
B)  aggregate demand is high, which puts downward pressure on wages and prices. 
C)  aggregate demand is low, which puts upward pressure on wages and prices. 
D)  aggregate demand is low, which puts downward pressure on wages and prices. 
A)  aggregate demand is high, which puts upward pressure on wages and prices. 
B)  aggregate demand is high, which puts downward pressure on wages and prices. 
C)  aggregate demand is low, which puts upward pressure on wages and prices. 
D)  aggregate demand is low, which puts downward pressure on wages and prices.

Question 13

Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?

Accepted Answer

A)  Inflation is reduced from 4 percent to 1 percent, and annual output falls by 10 percent. 
B)  Inflation is reduced from 6 percent to 4 percent, and annual output falls by 10 percent. 
C)  Inflation is reduced from 8 percent to 5 percent, and annual output falls by 9 percent. 
D)  Inflation is reduced from 3 percent to 2 percent, and annual output falls by 3 percent. 
A)  Inflation is reduced from 4 percent to 1 percent, and annual output falls by 10 percent. 
B)  Inflation is reduced from 6 percent to 4 percent, and annual output falls by 10 percent. 
C)  Inflation is reduced from 8 percent to 5 percent, and annual output falls by 9 percent. 
D)  Inflation is reduced from 3 percent to 2 percent, and annual output falls by 3 percent.

Question 14

Figure 35-6
Use the graph below to answer the following questions.  
-Refer to Figure 35-6. The money supply growth rate is greatest at

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  F. 
A)  A. 
B)  B. 
C)  C. 
D)  F.

Question 15

Suppose the price level is 115.00 at the end of 2020, 112.02 at the end of 2021, and 109.08 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

Accepted Answer

No. Since the price level is f

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. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Accepted Answer

A)  the outcome of a favorable supply shock. 
B)  falling inflation. 
C)  stagflation. 
D)  All of the above are correct. 
A)  the outcome of a favorable supply shock. 
B)  falling inflation. 
C)  stagflation. 
D)  All of the above are correct.

Question 17

Proponents of rational expectations argued that the sacrifice ratio

Accepted Answer

A)  could be high because it was rational for people not to immediately change their expectations. 
B)  could be high because people might adjust their expectations quickly if they found anti-inflation policy credible. 
C)  could be low because it was rational for people not to immediately change their expectations. 
D)  could be low because people might adjust their expectations quickly if they found anti-inflation policy credible. 
A)  could be high because it was rational for people not to immediately change their expectations. 
B)  could be high because people might adjust their expectations quickly if they found anti-inflation policy credible. 
C)  could be low because it was rational for people not to immediately change their expectations. 
D)  could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.

Question 18

Suppose that the money supply increases. In the short run this decreases unemployment 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 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 supply model. 
D)  the aggregate demand and aggregate supply model, but not according to the short-run Phillips curve.

Question 19

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

Accepted Answer

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

Question 20

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

Accepted Answer

A)  increase the rate at which the money supply increases. This will also move inflation closer to its previous rate.. 
B)  increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate 
C)  decrease the rate at which the money supply increases. This will also move inflation closer to its original rate 
D)  decrease the rate at which the money supply increases. However, this will make higher than its previous rate. 
A)  increase the rate at which the money supply increases. This will also move inflation closer to its previous rate.. 
B)  increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate 
C)  decrease the rate at which the money supply increases. This will also move inflation closer to its original rate 
D)  decrease the rate at which the money supply increases. However, this will make higher than its previous rate.

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

By raising aggregate demand more than anticipated, policymakers

If the unemployment rate is below the natural rate, then

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

In the long run, if the Fed decreases the rate at which it increases the money supply,

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

Contractionary monetary policy

Which of the following leads to a lower level of unemployment in the long run?

In the long run, policy that changes aggregate demand changes

Which of the following shifts aggregate supply to the right?

Samuelson and Solow argued that when unemployment is high,

Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. The money supply growth rate is greatest at

Suppose the price level is 115.00 at the end of 2020, 112.02 at the end of 2021, and 109.08 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

Proponents of rational expectations argued that the sacrifice ratio

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

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

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

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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