Question 1

"Okun's Law" is the close relationship observed between a period's ________ unemployment rate and ________.

Accepted Answer

A)  actual unemployment rate, (Y/YN) 
B)  actual unemployment rate, YN 
C)  inflation rate, (Y/YN) 
D)  inflation rate, Y 
A)  actual unemployment rate, (Y/YN) 
B)  actual unemployment rate, YN 
C)  inflation rate, (Y/YN) 
D)  inflation rate, Y

Question 2

The short-run equilibrium of inflation and real GDP

Accepted Answer

A)  depends only on the rate of growth of the money supply. 
B)  occurs where expected inflation equals actual inflation. 
C)  depends only on the rate of growth of nominal GDP. 
D)  None of these. 
A)  depends only on the rate of growth of the money supply. 
B)  occurs where expected inflation equals actual inflation. 
C)  depends only on the rate of growth of nominal GDP. 
D)  None of these.

Question 3

COLAs ________ the probability that a permanent adverse supply shock will permanently increase an economy's ________.

Accepted Answer

A)  increase, inflation rate 
B)  increase, price level 
C)  decrease, inflation rate 
D)  decrease, price level 
A)  increase, inflation rate 
B)  increase, price level 
C)  decrease, inflation rate 
D)  decrease, price level

Question 4

A beneficial supply shock will shift the short-run Phillips Curve

Accepted Answer

A)  inward to the left. 
B)  downward to the right. 
C)  upward to the left. 
D)  downward to the left. 
A)  inward to the left. 
B)  downward to the right. 
C)  upward to the left. 
D)  downward to the left.

Question 5

Figure 8-5  
-In the figure above, from initial point A in the top diagram AD0 shifts to AD1, while at the same time the nominal wage rises by 5 percent. Short-run equilibrium occurs at point

Accepted Answer

A)  G. 
B)  B. 
C)  C. 
D)  D. 
E)  F. 
A)  G. 
B)  B. 
C)  C. 
D)  D. 
E)  F.

Question 6

Figure 8-2  
-In the figure above, a policy that maintains nominal GDP growth in the advent of an adverse supply shock is a(n)

Accepted Answer

A)  extinguishing policy; M. 
B)  neutral policy; L. 
C)  accommodating policy; N. 
D)  incomes policy; N. 
A)  extinguishing policy; M. 
B)  neutral policy; L. 
C)  accommodating policy; N. 
D)  incomes policy; N.

Question 7

"Okun's Law" is the ________ relation between the ________ and the difference between the actual unemployment rate and the average rate of unemployment.

Accepted Answer

A)  direct; output ratio 
B)  observed positive; price ratio 
C)  implicit positive; output ratio 
D)  negative; output ratio 
A)  direct; output ratio 
B)  observed positive; price ratio 
C)  implicit positive; output ratio 
D)  negative; output ratio

Question 8

From a long-run equilibrium with p = pe = 0, suppose x rises to 6. If initially pe remains at zero and p rises to 4, Y becomes

Accepted Answer

A)  110. 
B)  102. 
C)  98. 
D)  96. 
A)  110. 
B)  102. 
C)  98. 
D)  96.

Question 9

The growth of nominal GDP

Accepted Answer

A)  can be broken down into the growth of the price level times the growth of real GDP. 
B)  is equal to the index of prices times the level of real GDP. 
C)  can be broken down into the growth of money supply plus the growth of velocity. 
D)  is the same as the growth of aggregate supply. 
A)  can be broken down into the growth of the price level times the growth of real GDP. 
B)  is equal to the index of prices times the level of real GDP. 
C)  can be broken down into the growth of money supply plus the growth of velocity. 
D)  is the same as the growth of aggregate supply.

Question 10

With COLAs in effect, if the Fed wishes to avoid a permanent acceleration of inflation after a permanent adverse supply shock, it

Accepted Answer

A)  must respond with an accommodating monetary policy. 
B)  must respond with a neutral monetary policy. 
C)  must respond with an extinguishing monetary policy. 
D)  can choose from accommodating, neutral, or extinguishing monetary policies. 
A)  must respond with an accommodating monetary policy. 
B)  must respond with a neutral monetary policy. 
C)  must respond with an extinguishing monetary policy. 
D)  can choose from accommodating, neutral, or extinguishing monetary policies.

Question 11

Suppose we are initially at a long-run SP/LP equilibrium with x = p = pe = 4. Then an adverse supply shock adds 3 percentage points to the inflation necessary to produce each level of output. A "neutral" policy response ________ the level of nominal GDP growth so that inflation is ________ percent while (Y/YN) ________.

Accepted Answer

A)  lowers, 4, falls 
B)  lowers, between 4 and 7, remains at 100 
C)  holds constant, between 4 and 7, falls 
D)  raises, 4, remains at 100 
E)  raises, 7, remains at 100 
A)  lowers, 4, falls 
B)  lowers, between 4 and 7, remains at 100 
C)  holds constant, between 4 and 7, falls 
D)  raises, 4, remains at 100 
E)  raises, 7, remains at 100

Question 12

Given an adverse supply shock, an "extinguishing policy response" will

Accepted Answer

A)  maintain the inflation rate and the output ratio. 
B)  lower the inflation rate and the output ratio. 
C)  raise the inflation rate and the output ratio. 
D)  maintain the inflation rate but lower the output ratio. 
A)  maintain the inflation rate and the output ratio. 
B)  lower the inflation rate and the output ratio. 
C)  raise the inflation rate and the output ratio. 
D)  maintain the inflation rate but lower the output ratio.

Question 13

Which of the following "theories" of the formation of expectations are discussed by Gordon?

Accepted Answer

A)  menu costs, markup, and wage efficiency theories 
B)  forward and backward-looking theories 
C)  economic, sociological, and political science theories 
D)  None of the above. 
A)  menu costs, markup, and wage efficiency theories 
B)  forward and backward-looking theories 
C)  economic, sociological, and political science theories 
D)  None of the above.

Question 14

Figure 8-2  
-If there is a permanent adverse supply shock

Accepted Answer

A)  the rate of inflation can be held constant if real wages are kept from falling. 
B)  an extinguishing policy will produce an acceleration of inflation. 
C)  the level of employment at the natural level of real GDP will remain constant only if the labor supply curve is vertical. 
D)  the natural level of real GDP will remain the same if the supply curve of labor is vertical. 
A)  the rate of inflation can be held constant if real wages are kept from falling. 
B)  an extinguishing policy will produce an acceleration of inflation. 
C)  the level of employment at the natural level of real GDP will remain constant only if the labor supply curve is vertical. 
D)  the natural level of real GDP will remain the same if the supply curve of labor is vertical.

Question 15

A positive relationship between inflation and unemployment emerged in

Accepted Answer

A)  1963-70. 
B)  1974-75 
C)  1986-90. 
D)  All of the above 
A)  1963-70. 
B)  1974-75 
C)  1986-90. 
D)  All of the above

Question 16

On the historical diagram with (Y/YN) on the horizontal axis, the disinflationary loop that began in 1981 contained an unusual movement almost straight downward during ________, attributable to ________.

Accepted Answer

A)  1983-84, an adverse supply shock 
B)  1983-84, renewed disinflationary monetary policy 
C)  1985-86, a beneficial supply shock 
D)  1985-86, renewed disinflationary monetary policy 
E)  1990-91, the catching-up of expected inflation 
A)  1983-84, an adverse supply shock 
B)  1983-84, renewed disinflationary monetary policy 
C)  1985-86, a beneficial supply shock 
D)  1985-86, renewed disinflationary monetary policy 
E)  1990-91, the catching-up of expected inflation

Question 17

Backward-looking expectations could be classified as a ________ theory.

Accepted Answer

A)  proactive 
B)  reactive 
C)  first proactive then a reactive 
D)  None of the above. 
A)  proactive 
B)  reactive 
C)  first proactive then a reactive 
D)  None of the above.

Question 18

The short-run SAS curve is positively sloped because as

Accepted Answer

A)  AD increases, mark-ups are increased, indicating variable mark-up pricing. 
B)  SAS increases, mark-ups are increased, indicating variable mark-up pricing. 
C)  AD increases, raw materials prices set by auction tend to rise. 
D)  A and C are both correct. 
A)  AD increases, mark-ups are increased, indicating variable mark-up pricing. 
B)  SAS increases, mark-ups are increased, indicating variable mark-up pricing. 
C)  AD increases, raw materials prices set by auction tend to rise. 
D)  A and C are both correct.

Question 19

If actual real GDP (Q) is permanently greater than natural real GDP (YN)

Accepted Answer

A)  the economy is off its short-run Phillips Curve. 
B)  the actual rate of inflation must be less than the expected rate. 
C)  the economy is on its long-run Phillips Curve. 
D)  there must be a continuous acceleration of inflation. 
A)  the economy is off its short-run Phillips Curve. 
B)  the actual rate of inflation must be less than the expected rate. 
C)  the economy is on its long-run Phillips Curve. 
D)  there must be a continuous acceleration of inflation.

Question 20

From an initial situation where P = 1.00 and Y = 100, 6 percent nominal GDP growth that causes P to go to 1.10 also causes Y to go to

Accepted Answer

A)  116. 
B)  104. 
C)  96. 
D)  94. 
A)  116. 
B)  104. 
C)  96. 
D)  94.

"Okun's Law" is the close relationship observed between a period's unemployment rate and .

The short-run equilibrium of inflation and real GDP

COLAs the probability that a permanent adverse supply shock will permanently increase an economy's .

A beneficial supply shock will shift the short-run Phillips Curve

Figure 8-5 -In the figure above, from initial point A in the top diagram AD0 shifts to AD1, while at the same time the nominal wage rises by 5 percent. Short-run equilibrium occurs at point

Figure 8-2 -In the figure above, a policy that maintains nominal GDP growth in the advent of an adverse supply shock is a(n)

"Okun's Law" is the relation between the and the difference between the actual unemployment rate and the average rate of unemployment.

From a long-run equilibrium with p = pe = 0, suppose x rises to 6. If initially pe remains at zero and p rises to 4, Y becomes

The growth of nominal GDP

With COLAs in effect, if the Fed wishes to avoid a permanent acceleration of inflation after a permanent adverse supply shock, it

Suppose we are initially at a long-run SP/LP equilibrium with x = p = pe = 4. Then an adverse supply shock adds 3 percentage points to the inflation necessary to produce each level of output. A "neutral" policy response the level of nominal GDP growth so that inflation is percent while (Y/YN) .

Given an adverse supply shock, an "extinguishing policy response" will

Which of the following "theories" of the formation of expectations are discussed by Gordon?

Figure 8-2 -If there is a permanent adverse supply shock

A positive relationship between inflation and unemployment emerged in

On the historical diagram with (Y/YN) on the horizontal axis, the disinflationary loop that began in 1981 contained an unusual movement almost straight downward during , attributable to .

Backward-looking expectations could be classified as a ________ theory.

The short-run SAS curve is positively sloped because as

If actual real GDP (Q) is permanently greater than natural real GDP (YN)

From an initial situation where P = 1.00 and Y = 100, 6 percent nominal GDP growth that causes P to go to 1.10 also causes Y to go to

What Is Macroeconomics

The Measurement of Income, Prices, and Unemployment

Spending, Income, and Interest Rates

Monetary and Fiscal Policy in the Is-Lm Model

The Government Budget, Foreign Borrowing, and the Twin Deficits

International Trade, Exchange Rates, and Macroeconomic Policy

Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

The Government Budget, the Public Debt, and Social Security

Money and Financial Markets

Stabilization Policy in the Closed and Open Economy

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro Confronts New Keynesian Macro

Conclusion: Where We Stand

Filters

Exam 8: Inflation: Its Causes and Cures

"Okun's Law" is the close relationship observed between a period's ________ unemployment rate and ________.

The short-run equilibrium of inflation and real GDP

COLAs ________ the probability that a permanent adverse supply shock will permanently increase an economy's ________.

A beneficial supply shock will shift the short-run Phillips Curve

Figure 8-5 -In the figure above, from initial point A in the top diagram AD0 shifts to AD1, while at the same time the nominal wage rises by 5 percent. Short-run equilibrium occurs at point

Figure 8-2 -In the figure above, a policy that maintains nominal GDP growth in the advent of an adverse supply shock is a(n)

"Okun's Law" is the ________ relation between the ________ and the difference between the actual unemployment rate and the average rate of unemployment.

From a long-run equilibrium with p = pe = 0, suppose x rises to 6. If initially pe remains at zero and p rises to 4, Y becomes

The growth of nominal GDP

With COLAs in effect, if the Fed wishes to avoid a permanent acceleration of inflation after a permanent adverse supply shock, it

Given an adverse supply shock, an "extinguishing policy response" will

Which of the following "theories" of the formation of expectations are discussed by Gordon?

Figure 8-2 -If there is a permanent adverse supply shock

A positive relationship between inflation and unemployment emerged in

On the historical diagram with (Y/YN) on the horizontal axis, the disinflationary loop that began in 1981 contained an unusual movement almost straight downward during ________, attributable to ________.

Backward-looking expectations could be classified as a ________ theory.

The short-run SAS curve is positively sloped because as

If actual real GDP (Q) is permanently greater than natural real GDP (YN)

From an initial situation where P = 1.00 and Y = 100, 6 percent nominal GDP growth that causes P to go to 1.10 also causes Y to go to

What Is Macroeconomics

The Measurement of Income, Prices, and Unemployment

Spending, Income, and Interest Rates

Monetary and Fiscal Policy in the Is-Lm Model

The Government Budget, Foreign Borrowing, and the Twin Deficits

International Trade, Exchange Rates, and Macroeconomic Policy

Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

The Government Budget, the Public Debt, and Social Security

Money and Financial Markets

Stabilization Policy in the Closed and Open Economy

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro Confronts New Keynesian Macro

Conclusion: Where We Stand

Filters

"Okun's Law" is the close relationship observed between a period's unemployment rate and .

COLAs the probability that a permanent adverse supply shock will permanently increase an economy's .

"Okun's Law" is the relation between the and the difference between the actual unemployment rate and the average rate of unemployment.

On the historical diagram with (Y/YN) on the horizontal axis, the disinflationary loop that began in 1981 contained an unusual movement almost straight downward during , attributable to .