Question 1

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Accepted Answer

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

Question 2

Figure 35-6
Use the graph below to answer the following questions.  
-Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Accepted Answer

A)  stays at C. 
B)  moves to B. 
C)  moves to F. 
D)  None of the above is consistent wit an increase in the money supply growth rate. 
A)  stays at C. 
B)  moves to B. 
C)  moves to F. 
D)  None of the above is consistent wit an increase in the money supply growth rate.

Question 3

Friedman and Phelps concluded that

Accepted Answer

A)  in the long run the Phillips curve is downward sloping, which is consistent with classical theory. 
B)  in the long run the Philips curve is downward sloping, which is inconsistent with classical theory. 
C)  in the long run the Phillips curve is vertical, which is consistent with classical theory. 
D)  in the long run the Phillips curve is vertical, which is inconsistent with classical theory. 
A)  in the long run the Phillips curve is downward sloping, which is consistent with classical theory. 
B)  in the long run the Philips curve is downward sloping, which is inconsistent with classical theory. 
C)  in the long run the Phillips curve is vertical, which is consistent with classical theory. 
D)  in the long run the Phillips curve is vertical, which is inconsistent with classical theory.

Question 4

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. What is measured along the vertical axis of the right-hand graph?

Accepted Answer

A)  the interest rate 
B)  the inflation rate 
C)  the wage rate 
D)  the growth rate of the nominal money supply 
A)  the interest rate 
B)  the inflation rate 
C)  the wage rate 
D)  the growth rate of the nominal money supply

Question 5

A. W. Phillips' findings were based on data

Accepted Answer

A)  from 1861-1957 for the United Kingdom. 
B)  from 1861-1957 for the United States. 
C)  mostly from the post-World War II period in the United Kingdom. 
D)  mostly from the post-World War II period in the United States. 
A)  from 1861-1957 for the United Kingdom. 
B)  from 1861-1957 for the United States. 
C)  mostly from the post-World War II period in the United Kingdom. 
D)  mostly from the post-World War II period in the United States.

Question 6

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Accepted Answer

A)  both 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)  both 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 7

If the central bank decreases 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 8

Which of the following is downward-sloping?

Accepted Answer

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

Question 9

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

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

Question 10

Economist A.W. Phillips found a negative correlation between

Accepted Answer

A)  output and unemployment. 
B)  unemployment and the interest rate. 
C)  output and the interest rate. 
D)  wage inflation and unemployment. 
A)  output and unemployment. 
B)  unemployment and the interest rate. 
C)  output and the interest rate. 
D)  wage inflation and unemployment.

Question 11

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Accepted Answer

A) True 
 B)False

Question 12

The proliferation of Internet usage serves as an example of a favorable supply shock.

Accepted Answer

A) True 
 B)False

Question 13

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A)  an increase in the natural rate of unemployment or expansionary monetary policy. 
B)  expansionary monetary policy, but not an increase in the natural rate of unemployment. 
C)  an increase in the natural rate of unemployment or a contractionary monetary policy. 
D)  contractionary monetary policy, but not an increase in the natural rate of unemployment. 
A)  an increase in the natural rate of unemployment or expansionary monetary policy. 
B)  expansionary monetary policy, but not an increase in the natural rate of unemployment. 
C)  an increase in the natural rate of unemployment or a contractionary monetary policy. 
D)  contractionary monetary policy, but not an increase in the natural rate of unemployment.

Question 14

As an economist working for a U.S. government agency you determine that a particular country has a sacrifice ratio of 3. Policy-makers in that country are thinking of lowering the inflation rate from 10% to 4%. Is this sacrifice ratio higher or lower than the typical estimate? From your numbers, what is the amount of output that will be lost for this country to reduce its inflation rate?

Accepted Answer

A)  The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
B)  The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual output to reach the new inflation target. 
C)  The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
D)  The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual output to reach the new inflation target. 
A)  The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
B)  The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual output to reach the new inflation target. 
C)  The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output to reach the new inflation target. 
D)  The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual output to reach the new inflation target.

Question 15

Data for the United States traced out an almost perfect Phillips curve for much of the

Accepted Answer

A)  1960s. 
B)  1970s. 
C)  1980s. 
D)  1990s. 
A)  1960s. 
B)  1970s. 
C)  1980s. 
D)  1990s.

Question 16

A central bank announces it will decrease the inflation rate by 10 percentage points. People are skeptical of the announcement, but do expect the central bank will reduce inflation by 5 percentage points and so expected inflation falls by 5 percentage points. If the central bank decreases inflation by only 3 percentage points then the unemployment rate will fall.

Accepted Answer

A) True 
 B)False

Question 17

An increase in the price of oil shifts the

Accepted Answer

A)  short-run Phillips curve right and the unemployment rate rises. 
B)  short-run Phillips curve right and the unemployment rate falls. 
C)  short-run Phillips curve left and the unemployment rate rises. 
D)  short-run Phillips curve left and the unemployment rate falls. 
A)  short-run Phillips curve right and the unemployment rate rises. 
B)  short-run Phillips curve right and the unemployment rate falls. 
C)  short-run Phillips curve left and the unemployment rate rises. 
D)  short-run Phillips curve left and the unemployment rate falls.

Question 18

Figure 35-4. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis.    
-Refer to Figure 35-4. What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A)  the interest rate 
B)  the price level 
C)  the government's budget deficit as a percent of GDP 
D)  the unemployment rate 
A)  the interest rate 
B)  the price level 
C)  the government's budget deficit as a percent of GDP 
D)  the unemployment rate

Question 19

Figure 35-4. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation rate is measured on the vertical axis.    
-Refer to Figure 35-4. What is measured along the horizontal axis of the left-hand graph?

Accepted Answer

A)  the wage rate 
B)  the inflation rate 
C)  output 
D)  the interest rate 
A)  the wage rate 
B)  the inflation rate 
C)  output 
D)  the interest rate

Question 20

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Accepted Answer

A)  Teresa reads in the newspaper that the central bank recently raised the money supply. 
B)  Jackie gets fewer job offers. 
C)  Miguel makes larger increases in the prices at his health food store. 
D)  Julie's nominal wage increase is larger. 
A)  Teresa reads in the newspaper that the central bank recently raised the money supply. 
B)  Jackie gets fewer job offers. 
C)  Miguel makes larger increases in the prices at his health food store. 
D)  Julie's nominal wage increase is larger.

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

Which of the following implies that an increase in the money supply growth rate permanently changes the unemployment rate?

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Friedman and Phelps concluded that

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. What is measured along the vertical axis of the right-hand graph?

A. W. Phillips' findings were based on data

If more firms chose to pay efficiency wages, which of the following would shift to the right?

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

Which of the following is downward-sloping?

Which of the following would not be associated with a favorable supply shock?

Economist A.W. Phillips found a negative correlation between

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

The proliferation of Internet usage serves as an example of a favorable supply shock.

A movement to the right along a given short-run Phillips curve could be caused by

Data for the United States traced out an almost perfect Phillips curve for much of the

An increase in the price of oil shifts the

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

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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