Question 1

If inflation is greater than expected, then the unemployment rate is

Accepted Answer

A)  above the natural rate. In the long run the short-run Phillips curve will shift right. 
B)  above the natural rate. In the long run the short-run Phillips curve will shift left. 
C)  below the natural rate. In the long run the short-run Phillips curve will shift right. 
D)  below the natural rate. In the long run the short-run Phillips curve will shift left. 
A)  above the natural rate. In the long run the short-run Phillips curve will shift right. 
B)  above the natural rate. In the long run the short-run Phillips curve will shift left. 
C)  below the natural rate. In the long run the short-run Phillips curve will shift right. 
D)  below the natural rate. In the long run the short-run Phillips curve will shift left.

Question 2

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Accepted Answer

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

Question 3

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

Accepted Answer

A)  of accommodative monetary policy. 
B)  of disinflation. 
C)  that was designed to reduce the unemployment rate. 
D)  that produced results that were clearly consistent with those predicted by rational-expectations theorists. 
A)  of accommodative monetary policy. 
B)  of disinflation. 
C)  that was designed to reduce the unemployment rate. 
D)  that produced results that were clearly consistent with those predicted by rational-expectations theorists.

Question 4

The experience of the Volcker disinflation of the early 1980s

Accepted Answer

A)  generally increased estimates of the sacrifice ratio. 
B)  generally decreased estimates of the sacrifice ratio. 
C)  clearly refuted the predictions of the proponents of rational expectations. 
D)  clearly refuted the predictions of the opponents of rational expectations. 
A)  generally increased estimates of the sacrifice ratio. 
B)  generally decreased estimates of the sacrifice ratio. 
C)  clearly refuted the predictions of the proponents of rational expectations. 
D)  clearly refuted the predictions of the opponents of rational expectations.

Question 5

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Accepted Answer

A)  falls, so there are upward pressures on wages and prices. 
B)  falls, so there are downward pressures on wages and prices. 
C)  rises, so there are upward pressures on wages and prices. 
D)  rises, so there are downward pressures on wages and prices. 
A)  falls, so there are upward pressures on wages and prices. 
B)  falls, so there are downward pressures on wages and prices. 
C)  rises, so there are upward pressures on wages and prices. 
D)  rises, so there are downward pressures on wages and prices.

Question 6

Figure 35-7
Use the two graphs in the diagram to answer the following questions.    
-Refer to Figure 35-7. The economy would move from C to B

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly. 
B)  in the short run if money supply growth decreased unexpectedly. 
C)  in the long run if money supply growth increases. 
D)  in the long run if money supply growth decreases. 
A)  in the short run if money supply growth increased unexpectedly. 
B)  in the short run if money supply growth decreased unexpectedly. 
C)  in the long run if money supply growth increases. 
D)  in the long run if money supply growth decreases.

Question 7

If there is a temporary adverse supply shock, then the short-run Phillips curve shifts to the

Accepted Answer

A)  right. It remains to the right regardless of monetary policy. 
B)  right. It remains to the right if the central bank pursues expansionary monetary policy. 
C)  left. It remains to the left regardless of monetary policy. 
D)  left. It remains to the left if the central bank pursues expansionary monetary policy. 
A)  right. It remains to the right regardless of monetary policy. 
B)  right. It remains to the right if the central bank pursues expansionary monetary policy. 
C)  left. It remains to the left regardless of monetary policy. 
D)  left. It remains to the left if the central bank pursues expansionary monetary policy.

Question 8

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

Accepted Answer

A)  0. 
B)  1. 
C)  4. 
D)  5. 
A)  0. 
B)  1. 
C)  4. 
D)  5.

Question 9

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Accepted Answer

A)  raised inflation and unemployment. 
B)  raised inflation and reduced unemployment. 
C)  reduced inflation and raised unemployment. 
D)  reduced inflation and unemployment. 
A)  raised inflation and unemployment. 
B)  raised inflation and reduced unemployment. 
C)  reduced inflation and raised unemployment. 
D)  reduced inflation and unemployment.

Question 10

The position of the long-run Phillips curve depends on

Accepted Answer

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

Question 11

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Accepted Answer

A)  unemployment will be higher 
B)  unemployment will be lower 
C)  inflation will be higher 
D)  inflation will be lower 
A)  unemployment will be higher 
B)  unemployment will be lower 
C)  inflation will be higher 
D)  inflation will be lower

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

If inflation is greater than expected, then the unemployment rate is

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course

The experience of the Volcker disinflation of the early 1980s

When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

If there is a temporary adverse supply shock, then the short-run Phillips curve shifts to the

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

The position of the long-run Phillips curve depends on

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

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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