Question 1

The segment of an adjustment loop in which movement is to the northwest is sometimes called

Accepted Answer

A)  inflation. 
B)  expansion. 
C)  stagflation. 
D)  undershooting. 
A)  inflation. 
B)  expansion. 
C)  stagflation. 
D)  undershooting.

Question 2

Preeminent among the causes of supply inflation in recent decades is

Accepted Answer

A)  general strikes 
B)  large changes in the price of oil. 
C)  unusually good or bad harvests. 
D)  unusually rapid adjustment of expected inflation to actual inflation. 
A)  general strikes 
B)  large changes in the price of oil. 
C)  unusually good or bad harvests. 
D)  unusually rapid adjustment of expected inflation to actual inflation.

Question 3

Figure 8-4  
-If there is a supply shock and there are full protection COLAs

Accepted Answer

A)  the Fed must reduce the money supply and follow an extinguishing policy to prevent an inflationary spiral. 
B)  the Fed must increase the money supply and follow an extinguishing policy to prevent an inflationary spiral. 
C)  the Fed must reduce the money supply and follow an accommodating policy to prevent an inflationary spiral. 
D)  the Fed must increase the money supply and follow an accommodating policy to prevent an inflationary spiral. 
A)  the Fed must reduce the money supply and follow an extinguishing policy to prevent an inflationary spiral. 
B)  the Fed must increase the money supply and follow an extinguishing policy to prevent an inflationary spiral. 
C)  the Fed must reduce the money supply and follow an accommodating policy to prevent an inflationary spiral. 
D)  the Fed must increase the money supply and follow an accommodating policy to prevent an inflationary spiral.

Question 4

Given an adverse supply shock, an "accommodating policy" 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 output ratio but allow inflation to increase. 
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 output ratio but allow inflation to increase.

Question 5

Suppose than successive AD/SAS equilibrium points run up a vertical line to the right of the LAS curve. It must be the case that inflation is ________ the average expected inflation figured into the wage contracts in force, which allows output to ________ the natural GDP.

Accepted Answer

A)  greater than, remain below 
B)  greater than, remain above 
C)  less than, remain below 
D)  less than, remain above 
E)  equal to, be maintained at 
A)  greater than, remain below 
B)  greater than, remain above 
C)  less than, remain below 
D)  less than, remain above 
E)  equal to, be maintained at

Question 6

Figure 8-6  
-In the figure above, the one year since 1970 that the U.S. economy managed to travel along path E was

Accepted Answer

A)  1971. 
B)  1970. 
C)  1979. 
D)  1986. 
A)  1971. 
B)  1970. 
C)  1979. 
D)  1986.

Question 7

From an initial long-run equilibrium with zero nominal demand growth, nominal GDP growth rises to a permanent 9 percent. If we assume adaptive expectations with a one-period lag, the dynamic process in response to the demand growth is

Accepted Answer

A)  a loop that eventually terminates at Y = 100 with 9 percent inflation. 
B)  a loop that eventually terminates at Y = 100 with zero percent inflation. 
C)  a straight path to the northeast until we reach Y = 109 with 9 percent inflation. 
D)  in the first period Y = 109 with zero inflation, and every period thereafter Y =100 with 9 percent inflation. 
A)  a loop that eventually terminates at Y = 100 with 9 percent inflation. 
B)  a loop that eventually terminates at Y = 100 with zero percent inflation. 
C)  a straight path to the northeast until we reach Y = 109 with 9 percent inflation. 
D)  in the first period Y = 109 with zero inflation, and every period thereafter Y =100 with 9 percent inflation.

Question 8

"Overshooting" refers to a temporary period in the adjustment loop during which

Accepted Answer

A)  the percentage deviation of real GDP from natural real GDP exceeds the growth rate of nominal GDP. 
B)  inflation exceeds the growth rate of nominal GDP. 
C)  nominal GDP growth exceeds its permanent value. 
D)  we move from one long-run equilibrium to another. 
A)  the percentage deviation of real GDP from natural real GDP exceeds the growth rate of nominal GDP. 
B)  inflation exceeds the growth rate of nominal GDP. 
C)  nominal GDP growth exceeds its permanent value. 
D)  we move from one long-run equilibrium to another.

Question 9

A negative relationship between inflation and unemployment emerged in

Accepted Answer

A)  1963-70. 
B)  1974-75 
C)  1979-81. 
D)  All of the above 
A)  1963-70. 
B)  1974-75 
C)  1979-81. 
D)  All of the above

Question 10

In ________ there were beneficial supply shocks to the U.S. economy.

Accepted Answer

A)  1974-1975. 
B)  1980-1981. 
C)  1995-1999. 
D)  All of the above. 
A)  1974-1975. 
B)  1980-1981. 
C)  1995-1999. 
D)  All of the above.

Question 11

As the output rises above 100%, unemployment

Accepted Answer

A)  falls and inflation rises. 
B)  rises and inflation falls. 
C)  and inflation rise. 
D)  and inflation fall. 
A)  falls and inflation rises. 
B)  rises and inflation falls. 
C)  and inflation rise. 
D)  and inflation fall.

Question 12

Figure 8-5  
-In the figure above, from point B suppose the nominal wage rises by 5 percent while aggregate demand remains constant. As a result we

Accepted Answer

A)  move to point C. 
B)  move to point D. 
C)  move to point F. 
D)  move to point A. 
E)  remain at point B. 
A)  move to point C. 
B)  move to point D. 
C)  move to point F. 
D)  move to point A. 
E)  remain at point B.

Question 13

The disinflation carried out with a cold turkey policy from 1980 to 1985 had a sacrifice ratio of

Accepted Answer

A)  35.5. 
B)  5.9. 
C)  450 billion. 
D)  4.4 
A)  35.5. 
B)  5.9. 
C)  450 billion. 
D)  4.4

Question 14

In the short-run, the impact of an adverse supply shock is to

Accepted Answer

A)  reduce real GDP and increase the inflation rate if the growth of nominal GDP remains the same. 
B)  reduce real GDP and leave the inflation rate unchanged if the growth of nominal GDP is reduced enough. 
C)  maintain the same level of real GDP and increase the inflation rate if the growth of nominal GDP is increase enough. 
D)  All of the above 
A)  reduce real GDP and increase the inflation rate if the growth of nominal GDP remains the same. 
B)  reduce real GDP and leave the inflation rate unchanged if the growth of nominal GDP is reduced enough. 
C)  maintain the same level of real GDP and increase the inflation rate if the growth of nominal GDP is increase enough. 
D)  All of the above

Question 15

Suppose the average unemployment rate = 6.0 and YN = 5000. According to Okun's law and the textbook's value for "h," what value of Y would bring about an actual unemployment rate of exactly 7.2 percent?

Accepted Answer

A)  4880 
B)  4940 
C)  5060 
D)  5150 
E)  4760 
A)  4880 
B)  4940 
C)  5060 
D)  5150 
E)  4760

Question 16

In order for the economy to be in long-run equilibrium

Accepted Answer

A)  price expectations must be accurate. 
B)  the economy is on an SP curve. 
C)  y = p. 
D)  All of the above. 
A)  price expectations must be accurate. 
B)  the economy is on an SP curve. 
C)  y = p. 
D)  All of the above.

Question 17

In the general linear formulation of Okun's law, the value of the coefficient "h" given in the textbook as fairly summarizing U.S. data is

Accepted Answer

A)  200. 
B)  4. 
C)  1.75. 
D)  0.5. 
E)  0.025 
A)  200. 
B)  4. 
C)  1.75. 
D)  0.5. 
E)  0.025

Question 18

With a "cold turkey" disinflationary policy of reducing GDP growth, the assumption of adaptive expectations causes

Accepted Answer

A)  inflation to not decrease in the long-run. 
B)  an immediate full reduction in inflation with no temporary recession. 
C)  a temporary recession en route to the final long-run equilibrium. 
D)  a permanently lower level of output at the long-run rate of inflation. 
A)  inflation to not decrease in the long-run. 
B)  an immediate full reduction in inflation with no temporary recession. 
C)  a temporary recession en route to the final long-run equilibrium. 
D)  a permanently lower level of output at the long-run rate of inflation.

Question 19

Using a model of the economy's structure to estimate the future behavior of a variable is the procedure we assume is being followed under ________ expectations.

Accepted Answer

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

Question 20

If the average unemployment rate = 6.0, Y = 4850, and YN = 5030, Okun's law, using the textbook's value for "h," predicts that the unemployment rate is approximately ________ percent.

Accepted Answer

A)  20.3 
B)  7.0 
C)  4.6 
D)  7.8 
E)  6.0 
A)  20.3 
B)  7.0 
C)  4.6 
D)  7.8 
E)  6.0

The segment of an adjustment loop in which movement is to the northwest is sometimes called

Preeminent among the causes of supply inflation in recent decades is

Figure 8-4 -If there is a supply shock and there are full protection COLAs

Given an adverse supply shock, an "accommodating policy" will

Suppose than successive AD/SAS equilibrium points run up a vertical line to the right of the LAS curve. It must be the case that inflation is the average expected inflation figured into the wage contracts in force, which allows output to the natural GDP.

Figure 8-6 -In the figure above, the one year since 1970 that the U.S. economy managed to travel along path E was

From an initial long-run equilibrium with zero nominal demand growth, nominal GDP growth rises to a permanent 9 percent. If we assume adaptive expectations with a one-period lag, the dynamic process in response to the demand growth is

"Overshooting" refers to a temporary period in the adjustment loop during which

A negative relationship between inflation and unemployment emerged in

In ________ there were beneficial supply shocks to the U.S. economy.

As the output rises above 100%, unemployment

Figure 8-5 -In the figure above, from point B suppose the nominal wage rises by 5 percent while aggregate demand remains constant. As a result we

The disinflation carried out with a cold turkey policy from 1980 to 1985 had a sacrifice ratio of

In the short-run, the impact of an adverse supply shock is to

Suppose the average unemployment rate = 6.0 and YN = 5000. According to Okun's law and the textbook's value for "h," what value of Y would bring about an actual unemployment rate of exactly 7.2 percent?

In order for the economy to be in long-run equilibrium

In the general linear formulation of Okun's law, the value of the coefficient "h" given in the textbook as fairly summarizing U.S. data is

With a "cold turkey" disinflationary policy of reducing GDP growth, the assumption of adaptive expectations causes

Using a model of the economy's structure to estimate the future behavior of a variable is the procedure we assume is being followed under ________ expectations.

If the average unemployment rate = 6.0, Y = 4850, and YN = 5030, Okun's law, using the textbook's value for "h," predicts that the unemployment rate is approximately ________ percent.

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

The segment of an adjustment loop in which movement is to the northwest is sometimes called

Preeminent among the causes of supply inflation in recent decades is

Figure 8-4 -If there is a supply shock and there are full protection COLAs

Given an adverse supply shock, an "accommodating policy" will

Suppose than successive AD/SAS equilibrium points run up a vertical line to the right of the LAS curve. It must be the case that inflation is ________ the average expected inflation figured into the wage contracts in force, which allows output to ________ the natural GDP.

Figure 8-6 -In the figure above, the one year since 1970 that the U.S. economy managed to travel along path E was

From an initial long-run equilibrium with zero nominal demand growth, nominal GDP growth rises to a permanent 9 percent. If we assume adaptive expectations with a one-period lag, the dynamic process in response to the demand growth is

"Overshooting" refers to a temporary period in the adjustment loop during which

A negative relationship between inflation and unemployment emerged in

In ________ there were beneficial supply shocks to the U.S. economy.

As the output rises above 100%, unemployment

Figure 8-5 -In the figure above, from point B suppose the nominal wage rises by 5 percent while aggregate demand remains constant. As a result we

The disinflation carried out with a cold turkey policy from 1980 to 1985 had a sacrifice ratio of

In the short-run, the impact of an adverse supply shock is to

Suppose the average unemployment rate = 6.0 and YN = 5000. According to Okun's law and the textbook's value for "h," what value of Y would bring about an actual unemployment rate of exactly 7.2 percent?

In order for the economy to be in long-run equilibrium

In the general linear formulation of Okun's law, the value of the coefficient "h" given in the textbook as fairly summarizing U.S. data is

With a "cold turkey" disinflationary policy of reducing GDP growth, the assumption of adaptive expectations causes

Using a model of the economy's structure to estimate the future behavior of a variable is the procedure we assume is being followed under ________ expectations.

If the average unemployment rate = 6.0, Y = 4850, and YN = 5030, Okun's law, using the textbook's value for "h," predicts that the unemployment rate is approximately ________ percent.

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

Suppose than successive AD/SAS equilibrium points run up a vertical line to the right of the LAS curve. It must be the case that inflation is the average expected inflation figured into the wage contracts in force, which allows output to the natural GDP.