Question 1

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

Accepted Answer

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

Question 2

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 short run an unexpected increase in money supply growth moves the economy to

Accepted Answer

A)  A and 1. 
B)  B and 2. 
C)  back to C and 3. 
D)  D and 4. 
A)  A and 1. 
B)  B and 2. 
C)  back to C and 3. 
D)  D and 4.

Question 3

Disinflation is like

Accepted Answer

A)  slowing a car down, whereas deflation is like putting the car into reverse gear. 
B)  maintaining a car's speed, whereas deflation is like slowing the car down. 
C)  putting a car into reverse gear, whereas deflation is like slowing the car down. 
D)  maintaining a car's speed, whereas deflation is like putting the car into reverse gear. 
A)  slowing a car down, whereas deflation is like putting the car into reverse gear. 
B)  maintaining a car's speed, whereas deflation is like slowing the car down. 
C)  putting a car into reverse gear, whereas deflation is like slowing the car down. 
D)  maintaining a car's speed, whereas deflation is like putting the car into reverse gear.

Question 4

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

Accepted Answer

The answer of A central bank raises the money supply...

Question 5

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 6

After an oil price shock, which of the following would move unemployment back towards its natural rate?

Accepted Answer

A)  the Fed sells bonds 
B)  the government raises taxes 
C)  the government increases expenditures 
D)  All of the above are correct. 
A)  the Fed sells bonds 
B)  the government raises taxes 
C)  the government increases expenditures 
D)  All of the above are correct.

Question 7

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

Accepted Answer

The answer of A central bank disinflates. Output falls by...

Question 8

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, an increase in taxes moves the economy to

Accepted Answer

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

Question 9

If the Fed raised the money supply growth by more than expected then the unemployment rate would_______in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Accepted Answer

fall. Eventually inflation exp

Question 10

The idea that the long-run Phillips curve is

Accepted Answer

A)  vertical stems from the analysis of Samuelson and Solow. 
B)  vertical stems from the analysis of Friedman and Phelps. 
C)  vertical was disproved by the experiment that monetary and fiscal policymakers inadvertently created in the 1970s. 
D)  downward-sloping can be correct if unemployment responds very quickly to unexpected inflation. 
A)  vertical stems from the analysis of Samuelson and Solow. 
B)  vertical stems from the analysis of Friedman and Phelps. 
C)  vertical was disproved by the experiment that monetary and fiscal policymakers inadvertently created in the 1970s. 
D)  downward-sloping can be correct if unemployment responds very quickly to unexpected inflation.

Question 11

In which case, if any, will inflation remain higher after a temporary adverse supply shock?

Accepted Answer

A)  both when the central bank maintains a higher money supply growth rate and when the central bank does nothing 
B)  only if the central bank does nothing 
C)  only if the central bank maintains a higher money supply growth rate 
D)  None of the above is correct. Whether the central bank maintains a higher money supply growth rate or not, the inflation rate will return to its original level. 
A)  both when the central bank maintains a higher money supply growth rate and when the central bank does nothing 
B)  only if the central bank does nothing 
C)  only if the central bank maintains a higher money supply growth rate 
D)  None of the above is correct. Whether the central bank maintains a higher money supply growth rate or not, the inflation rate will return to its original level.

Question 12

Other things constant, which of the following would reduce unemployment and raise inflation?

Accepted Answer

A)  businesses become more optimistic about the future of the economy 
B)  because of high growth abroad, net exports rise 
C)  the government cuts taxes 
D)  All of the above are correct. 
A)  businesses become more optimistic about the future of the economy 
B)  because of high growth abroad, net exports rise 
C)  the government cuts taxes 
D)  All of the above are correct.

Question 13

Prime Minister Emma Bigshot urges passage of a bill to reduce unemployment benefits from very generous levels in her country. She also urges her country's central bank to raise the rate at which the money supply is increasing. In the long run which, if either, of these policies will reduce the unemployment rate?

Accepted Answer

A)  both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing 
B)  reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing 
C)  raising the rate at which the money supply is increasing, but not reducing the generosity of unemployment benefits 
D)  neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasing 
A)  both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing 
B)  reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing 
C)  raising the rate at which the money supply is increasing, but not reducing the generosity of unemployment benefits 
D)  neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasing

Question 14

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Accepted Answer

A)  moving to the left along the short-run Phillips curve. 
B)  moving to the right along the short-run Phillips curve. 
C)  shifting the short-run Phillips curve to the right. 
D)  shifting the short-run Phillips curve to the left. 
A)  moving to the left along the short-run Phillips curve. 
B)  moving to the right along the short-run Phillips curve. 
C)  shifting the short-run Phillips curve to the right. 
D)  shifting the short-run Phillips curve to the left.

Question 15

What does the natural-rate hypothesis claim?

Accepted Answer

That eventually unem

Question 16

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

Accepted Answer

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

Question 17

Figure 35-5  
-Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

Accepted Answer

A)  A, B 
B)  A, D 
C)  C, B 
D)  None of the above is correct. 
A)  A, B 
B)  A, D 
C)  C, B 
D)  None of the above is correct.

Question 18

The short-run Phillips curve is based on the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 19

If the Fed responded to an adverse supply shock by increasing the growth rate of the money supply and maintained the higher growth rate, what would eventually happen to the short-run Phillips curve? Why?

Accepted Answer

It would shift right

Question 20

If people anticipate higher inflation, but inflation remains the same then

Accepted Answer

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

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

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

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 short run an unexpected increase in money supply growth moves the economy to

Disinflation is like

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

After an oil price shock, which of the following would move unemployment back towards its natural rate?

A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?

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, an increase in taxes moves the economy to

If the Fed raised the money supply growth by more than expected then the unemployment rate would_______in the short run. Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

The idea that the long-run Phillips curve is

In which case, if any, will inflation remain higher after a temporary adverse supply shock?

Other things constant, which of the following would reduce unemployment and raise inflation?

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

What does the natural-rate hypothesis claim?

Which of the following models imply that a decrease in the money supply reduces unemployment temporarily but not permanently?

Figure 35-5 -Refer to figure 35-5. In this order, which curve is a long-run Phillips curve and which is a short-run Phillips curve?

The short-run Phillips curve is based on the classical dichotomy.

If the Fed responded to an adverse supply shock by increasing the growth rate of the money supply and maintained the higher growth rate, what would eventually happen to the short-run Phillips curve? Why?

If people anticipate higher inflation, but inflation remains the same 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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