Question 1

If x is the growth rate of nominal GDP, p is the inflation rate, and y is the growth rate of real output, then

Accepted Answer

A)  y = x + p. 
B)  p = x + y. 
C)  x = p + y. 
D)  none of the above. 
A)  y = x + p. 
B)  p = x + y. 
C)  x = p + y. 
D)  none of the above.

Question 2

From 1989 to 1992, the output ratio fell by 4 percent while the unemployment rate rose by 1.44 percentage points. This implies an Okun's law coefficient of

Accepted Answer

A)  2.60 
B)  0.36 
C)  2.40 
D)  5.40 
E)  0.059 
A)  2.60 
B)  0.36 
C)  2.40 
D)  5.40 
E)  0.059

Question 3

The existence of COLA's in an economy will introduce

Accepted Answer

A)  real wage rigidity and shift the LP curve. 
B)  real wage rigidity and shift the SP curve. 
C)  nominal wage rigidity and shift the SP curves. 
D)  nominal wage rigidity and shift the LP curve. 
A)  real wage rigidity and shift the LP curve. 
B)  real wage rigidity and shift the SP curve. 
C)  nominal wage rigidity and shift the SP curves. 
D)  nominal wage rigidity and shift the LP curve.

Question 4

Figure 8-6  
-In the figure above, an adverse supply shock accompanied by a neutral policy take us along path

Accepted Answer

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

Question 5

The natural unemployment rate fell in the 1990s in part because of ________.

Accepted Answer

A)  a drop in the fraction of labor force made up of teenagers. 
B)  an increase in the fraction of the male labor force in prison. 
C)  the growth in temporary help agencies. 
D)  All of the above. 
A)  a drop in the fraction of labor force made up of teenagers. 
B)  an increase in the fraction of the male labor force in prison. 
C)  the growth in temporary help agencies. 
D)  All of the above.

Question 6

The inflation rate, actual employment rate and natural rate of unemployment from 1980 to 1996 indicate that

Accepted Answer

A)  the inflation rate fell when the actual unemployment rate exceeded the natural unemployment rate. 
B)  the inflation rate increased when the natural rate of unemployment exceeded the actual unemployment rate. 
C)  during most of this period the inflation rate was falling and the actual unemployment rate exceeded the natural rate of unemployment. 
D)  All of the above. 
A)  the inflation rate fell when the actual unemployment rate exceeded the natural unemployment rate. 
B)  the inflation rate increased when the natural rate of unemployment exceeded the actual unemployment rate. 
C)  during most of this period the inflation rate was falling and the actual unemployment rate exceeded the natural rate of unemployment. 
D)  All of the above.

Question 7

Figure 8-3  
-Suppose that an adverse supply shock causes downward pressure on nominal wages and unemployment to increase. If the Fed increases the money supply to stimulate AD and restore output to its previous level (assuming no change in the labor supply) a(n)

Accepted Answer

A)  one time increase in prices will result. 
B)  inflationary spiral will begin if the real GDP has been reduced. 
C)  increase in the real GDP will follow. 
D)  All of the above 
A)  one time increase in prices will result. 
B)  inflationary spiral will begin if the real GDP has been reduced. 
C)  increase in the real GDP will follow. 
D)  All of the above

Question 8

Along the SP curve with expected inflation of 6 percent, we are above the natural GDP when

Accepted Answer

A)  inflation falls below 6 percent. 
B)  inflation rises above 6 percent. 
C)  expected inflation falls below 6 percent. 
D)  expected inflation rises above 6 percent. 
A)  inflation falls below 6 percent. 
B)  inflation rises above 6 percent. 
C)  expected inflation falls below 6 percent. 
D)  expected inflation rises above 6 percent.

Question 9

Continuous inflation in the long run requires repeated ________ shifts of the AD curve caused by a continuous increase in the ________.

Accepted Answer

A)  leftward; government expenditures 
B)  rightward; nominal money supply 
C)  inward; nominal money supply 
D)  None of the above, inflation is primarily a supply side phenomenon. 
A)  leftward; government expenditures 
B)  rightward; nominal money supply 
C)  inward; nominal money supply 
D)  None of the above, inflation is primarily a supply side phenomenon.

Question 10

Figure 8-5  
-In the figure above, a crucial assumption that goes into positioning the SP curve in the bottom diagram is that

Accepted Answer

A)  the wage rate is 1.00. 
B)  expected inflation is zero. 
C)  expected inflation is 5 percent. 
D)  the AD curve is AD1. 
E)  the shift of AD1 to AD2 will be repeated continuously. 
A)  the wage rate is 1.00. 
B)  expected inflation is zero. 
C)  expected inflation is 5 percent. 
D)  the AD curve is AD1. 
E)  the shift of AD1 to AD2 will be repeated continuously.

Question 11

The slope of the SP curve depends on

Accepted Answer

A)  how business changes its markups when output varies. 
B)  whether the expansionary force in the economy is coming through monetary policy or fiscal policy. 
C)  the percentage of GDP that is sold on auction markets. 
D)  Both A and C. 
A)  how business changes its markups when output varies. 
B)  whether the expansionary force in the economy is coming through monetary policy or fiscal policy. 
C)  the percentage of GDP that is sold on auction markets. 
D)  Both A and C.

Question 12

"Okun's Law" refers to

Accepted Answer

A)  the trade-off between inflation and unemployment. 
B)  the relationship between real and nominal output growth. 
C)  minimum wage laws and the impact of price controls. 
D)  the relationship between the unemployment rate and the ratio of actual to natural output. 
A)  the trade-off between inflation and unemployment. 
B)  the relationship between real and nominal output growth. 
C)  minimum wage laws and the impact of price controls. 
D)  the relationship between the unemployment rate and the ratio of actual to natural output.

Question 13

Compared to an economy with staggered overlapping wage contracts, an economy in which wage contracts are renegotiated simultaneously will tend to have

Accepted Answer

A)  steeper SP curves. 
B)  flatter SP curves. 
C)  faster shifting of its SP curves. 
D)  slower shifting of its SP curves. 
A)  steeper SP curves. 
B)  flatter SP curves. 
C)  faster shifting of its SP curves. 
D)  slower shifting of its SP curves.

Question 14

In the SP/LP model it is possible to have all short-run equilibrium points run along the LP line if we employ the assumption of ________ expectations.

Accepted Answer

A)  backward-looking 
B)  forward-looking 
C)  adaptive 
D)  extrapolative 
A)  backward-looking 
B)  forward-looking 
C)  adaptive 
D)  extrapolative

Question 15

The success or failure of economic policy with regard to the twin goals may be measured by the

Accepted Answer

A)  stagflation rate. 
B)  unemployment rate. 
C)  change in the output ratio. 
D)  inflation rate. 
A)  stagflation rate. 
B)  unemployment rate. 
C)  change in the output ratio. 
D)  inflation rate.

Question 16

The short-run Phillips Curve gives

Accepted Answer

A)  the actual short-run level of real GDP and inflation. 
B)  all possible combinations of real GDP and inflation, for a given set of expectations. 
C)  all possible combinations of real GDP and inflation, for fully adjusted expectations. 
D)  the response of real GDP and inflation to supply shocks. 
A)  the actual short-run level of real GDP and inflation. 
B)  all possible combinations of real GDP and inflation, for a given set of expectations. 
C)  all possible combinations of real GDP and inflation, for fully adjusted expectations. 
D)  the response of real GDP and inflation to supply shocks.

Question 17

Figure 8-5  
-In the figure above, if we move from points A to B to C in the top diagram, this is translated to the bottom diagram as a move from points

Accepted Answer

A)  A to J and back to A. 
B)  A to J. 
C)  A to H. 
D)  A to J to H. 
E)  A to H and back to A. 
A)  A to J and back to A. 
B)  A to J. 
C)  A to H. 
D)  A to J to H. 
E)  A to H and back to A.

Question 18

According to "Okun's Law," if expansionary monetary policy were to increase Y/Y(N) by 3 percent, we could expect the unemployment rate to decrease by ________ percentage points.

Accepted Answer

A)  0.4 
B)  1.0 
C)  1.5 
D)  1.6 
A)  0.4 
B)  1.0 
C)  1.5 
D)  1.6

Question 19

Figure 8-5  
-In the figure above, in going from points A to B the real wage ________, and then from point B to point C (where the exact price level is 1.1025, rounded to 1.10 in the diagram) the real wage ________.

Accepted Answer

A)  rose, remained constant 
B)  rose, rose again 
C)  fell, remained constant 
D)  fell, fell again 
E)  remained constant, remained constant 
A)  rose, remained constant 
B)  rose, rose again 
C)  fell, remained constant 
D)  fell, fell again 
E)  remained constant, remained constant

Question 20

The "indirect effect" of a beneficial supply shock in the SP/LP model is

Accepted Answer

A)  a rightward shift of LP. 
B)  a leftward shift of LP. 
C)  an upward shift of SP. 
D)  a downward shift of SP. 
A)  a rightward shift of LP. 
B)  a leftward shift of LP. 
C)  an upward shift of SP. 
D)  a downward shift of SP.

If x is the growth rate of nominal GDP, p is the inflation rate, and y is the growth rate of real output, then

From 1989 to 1992, the output ratio fell by 4 percent while the unemployment rate rose by 1.44 percentage points. This implies an Okun's law coefficient of

The existence of COLA's in an economy will introduce

Figure 8-6 -In the figure above, an adverse supply shock accompanied by a neutral policy take us along path

The natural unemployment rate fell in the 1990s in part because of ________.

The inflation rate, actual employment rate and natural rate of unemployment from 1980 to 1996 indicate that

Figure 8-3 -Suppose that an adverse supply shock causes downward pressure on nominal wages and unemployment to increase. If the Fed increases the money supply to stimulate AD and restore output to its previous level (assuming no change in the labor supply) a(n)

Along the SP curve with expected inflation of 6 percent, we are above the natural GDP when

Continuous inflation in the long run requires repeated shifts of the AD curve caused by a continuous increase in the .

Figure 8-5 -In the figure above, a crucial assumption that goes into positioning the SP curve in the bottom diagram is that

The slope of the SP curve depends on

"Okun's Law" refers to

Compared to an economy with staggered overlapping wage contracts, an economy in which wage contracts are renegotiated simultaneously will tend to have

In the SP/LP model it is possible to have all short-run equilibrium points run along the LP line if we employ the assumption of ________ expectations.

The success or failure of economic policy with regard to the twin goals may be measured by the

The short-run Phillips Curve gives

Figure 8-5 -In the figure above, if we move from points A to B to C in the top diagram, this is translated to the bottom diagram as a move from points

According to "Okun's Law," if expansionary monetary policy were to increase Y/Y(N) by 3 percent, we could expect the unemployment rate to decrease by ________ percentage points.

Figure 8-5 -In the figure above, in going from points A to B the real wage , and then from point B to point C (where the exact price level is 1.1025, rounded to 1.10 in the diagram) the real wage .

The "indirect effect" of a beneficial supply shock in the SP/LP model is

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

If x is the growth rate of nominal GDP, p is the inflation rate, and y is the growth rate of real output, then

From 1989 to 1992, the output ratio fell by 4 percent while the unemployment rate rose by 1.44 percentage points. This implies an Okun's law coefficient of

The existence of COLA's in an economy will introduce

Figure 8-6 -In the figure above, an adverse supply shock accompanied by a neutral policy take us along path

The natural unemployment rate fell in the 1990s in part because of ________.

The inflation rate, actual employment rate and natural rate of unemployment from 1980 to 1996 indicate that

Figure 8-3 -Suppose that an adverse supply shock causes downward pressure on nominal wages and unemployment to increase. If the Fed increases the money supply to stimulate AD and restore output to its previous level (assuming no change in the labor supply) a(n)

Along the SP curve with expected inflation of 6 percent, we are above the natural GDP when

Continuous inflation in the long run requires repeated ________ shifts of the AD curve caused by a continuous increase in the ________.

Figure 8-5 -In the figure above, a crucial assumption that goes into positioning the SP curve in the bottom diagram is that

The slope of the SP curve depends on

"Okun's Law" refers to

Compared to an economy with staggered overlapping wage contracts, an economy in which wage contracts are renegotiated simultaneously will tend to have

In the SP/LP model it is possible to have all short-run equilibrium points run along the LP line if we employ the assumption of ________ expectations.

The success or failure of economic policy with regard to the twin goals may be measured by the

The short-run Phillips Curve gives

Figure 8-5 -In the figure above, if we move from points A to B to C in the top diagram, this is translated to the bottom diagram as a move from points

According to "Okun's Law," if expansionary monetary policy were to increase Y/Y(N) by 3 percent, we could expect the unemployment rate to decrease by ________ percentage points.

Figure 8-5 -In the figure above, in going from points A to B the real wage ________, and then from point B to point C (where the exact price level is 1.1025, rounded to 1.10 in the diagram) the real wage ________.

The "indirect effect" of a beneficial supply shock in the SP/LP model is

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

Continuous inflation in the long run requires repeated shifts of the AD curve caused by a continuous increase in the .

Figure 8-5 -In the figure above, in going from points A to B the real wage , and then from point B to point C (where the exact price level is 1.1025, rounded to 1.10 in the diagram) the real wage .