Question 1

The equation, Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation),

Accepted Answer

A)  is the equation of the short-run Phillips curve. 
B)  implies the short-run Phillips curve shifts every time there is a change in actual inflation. 
C)  reflects the reasoning of Samuelson and Solow. 
D)  All of the above are correct. 
A)  is the equation of the short-run Phillips curve. 
B)  implies the short-run Phillips curve shifts every time there is a change in actual inflation. 
C)  reflects the reasoning of Samuelson and Solow. 
D)  All of the above are correct.

Question 2

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 3

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie

Question 4

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 5

An adverse supply shock causes inflation to

Accepted Answer

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

Question 6

Between 1993 and 2001 the U.S. economy experienced

Accepted Answer

A)  relatively low inflation and unemployment rates. 
B)  relatively high inflation and unemployment rates. 
C)  relatively low inflation rates and relatively high unemployment rates. 
D)  relatively high inflation rates and relatively low unemployment rates. 
A)  relatively low inflation and unemployment rates. 
B)  relatively high inflation and unemployment rates. 
C)  relatively low inflation rates and relatively high unemployment rates. 
D)  relatively high inflation rates and relatively low unemployment rates.

Question 7

A vertical long-run Phillips curve is consistent with

Accepted Answer

A)  the conclusion of Friedman and Phelps, but it is not consistent with the classical idea of monetary neutrality. 
B)  the classical idea of monetary neutrality, but it is not consistent with the conclusion of Friedman and Phelps. 
C)  both the conclusion of Friedman and Phelps and the classical idea of monetary neutrality. 
D)  neither the conclusion of Friedman and Phelps nor the classical idea of monetary neutrality. 
A)  the conclusion of Friedman and Phelps, but it is not consistent with the classical idea of monetary neutrality. 
B)  the classical idea of monetary neutrality, but it is not consistent with the conclusion of Friedman and Phelps. 
C)  both the conclusion of Friedman and Phelps and the classical idea of monetary neutrality. 
D)  neither the conclusion of Friedman and Phelps nor the classical idea of monetary neutrality.

Question 8

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Accepted Answer

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

Question 9

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Accepted Answer

A)  shift both the short-run aggregate supply and the short-run Phillips curve right. 
B)  shift both the short-run aggregate supply and the short-run Phillips curve left. 
C)  shift the short-run aggregate supply curve to the right, and the short-run Phillips curve to the left. 
D)  shift the short-run aggregate supply curve to the left, and the short-run Phillips curve to the right. 
A)  shift both the short-run aggregate supply and the short-run Phillips curve right. 
B)  shift both the short-run aggregate supply and the short-run Phillips curve left. 
C)  shift the short-run aggregate supply curve to the right, and the short-run Phillips curve to the left. 
D)  shift the short-run aggregate supply curve to the left, and the short-run Phillips curve to the right.

Question 10

One way to express the classical idea of monetary neutrality is to draw

Accepted Answer

A)  a downward-sloping short-run Phillips curve. 
B)  an upward-sloping short-run Phillips curve. 
C)  a downward-sloping long-run Phillips curve. 
D)  a vertical long-run Phillips curve. 
A)  a downward-sloping short-run Phillips curve. 
B)  an upward-sloping short-run Phillips curve. 
C)  a downward-sloping long-run Phillips curve. 
D)  a vertical long-run Phillips curve.

Question 11

The equation, Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation),

Accepted Answer

A)  is the equation of the short-run Phillips curve. 
B)  implies there can be no stable short-run Phillips curve. 
C)  reflects the reasoning of Friedman and Phelps. 
D)  All of the above are correct. 
A)  is the equation of the short-run Phillips curve. 
B)  implies there can be no stable short-run Phillips curve. 
C)  reflects the reasoning of Friedman and Phelps. 
D)  All of the above are correct.

Question 12

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 13

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Accepted Answer

A)  Bureau of the Budget. 
B)  Bureau of Labor Statistics. 
C)  Department of the Treasury. 
D)  President's Council of Economic Advisors. 
A)  Bureau of the Budget. 
B)  Bureau of Labor Statistics. 
C)  Department of the Treasury. 
D)  President's Council of Economic Advisors.

Question 14

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 significant increase in the world price of oil could explain

Accepted Answer

A)  the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the shift of the Phillips curve from PC1 to PC2. 
B)  the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. 
C)  both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. 
D)  neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2. 
A)  the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the shift of the Phillips curve from PC1 to PC2. 
B)  the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of the aggregate-supply curve from AS1 to AS2. 
C)  both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2. 
D)  neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2.

Question 15

The sacrifice ratio is the

Accepted Answer

A)  sum of the inflation and unemployment rates. 
B)  inflation rate divided by the unemployment rate. 
C)  number of percentage points annual output falls for each percentage point reduction in inflation. 
D)  number of percentage points unemployment rises for each percentage point reduction in inflation. 
A)  sum of the inflation and unemployment rates. 
B)  inflation rate divided by the unemployment rate. 
C)  number of percentage points annual output falls for each percentage point reduction in inflation. 
D)  number of percentage points unemployment rises for each percentage point reduction in inflation.

Question 16

Figure 35-7
Use the two graphs in the diagram to answer the following questions.    
-Refer to Figure 35-7. Starting from C and 3, in the long run, a decrease in money supply growth moves the economy to

Accepted Answer

A)  A and 1. 
B)  back to C and 3. 
C)  D and 4. 
D)  F and 5. 
A)  A and 1. 
B)  back to C and 3. 
C)  D and 4. 
D)  F and 5.

Question 17

If people believe that the central bank is going to reduce inflation, then

Accepted Answer

A)  the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B)  the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C)  the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D)  the short-run Phillips curve shifts left and the sacrifice ratio will fall. 
A)  the short-run Phillips curve shifts right and the sacrifice ratio will rise. 
B)  the short-run Phillips curve shifts right and the sacrifice ratio will fall. 
C)  the short-run Phillips curve shifts left and the sacrifice ratio will rise. 
D)  the short-run Phillips curve shifts left and the sacrifice ratio will fall.

Question 18

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

Accepted Answer

A) True 
 B)False

Question 19

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Accepted Answer

A)  lowers both inflation and unemployment. 
B)  lowers inflation but raises unemployment. 
C)  raises inflation but lowers unemployment. 
D)  raises both inflation and unemployment. 
A)  lowers both inflation and unemployment. 
B)  lowers inflation but raises unemployment. 
C)  raises inflation but lowers unemployment. 
D)  raises both inflation and unemployment.

Question 20

Figure 35-8
Use this graph to answer the questions below.  
-Refer to figure 35-8. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Accepted Answer

A)  3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
B)  3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. 
C)  7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
D)  7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. 
A)  3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
B)  3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. 
C)  7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 
D)  7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.

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

The equation, Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation),

Most economists believe that a tradeoff between inflation and unemployment exists

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

According to classical macroeconomic theory, in the long run

An adverse supply shock causes inflation to

Between 1993 and 2001 the U.S. economy experienced

A vertical long-run Phillips curve is consistent with

If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

One way to express the classical idea of monetary neutrality is to draw

The equation, Unemployment rate = Natural rate of unemployment - a × (Αctual inflation - Expected inflation),

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Closely watched indicators such as the inflation rate and unemployment are released each month by the

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 significant increase in the world price of oil could explain

The sacrifice ratio is the

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the long run, a decrease in money supply growth moves the economy to

If people believe that the central bank is going to reduce inflation, then

U.S. monetary policy in the early 1980s reduced the inflation rate by more than half.

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Figure 35-8 Use this graph to answer the questions below. -Refer to figure 35-8. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves 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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