Question 1

If expectations about inflation are adaptive,they are ________.

Accepted Answer

A) formed by looking at the future 
B) likely to change rapidly 
C) based on past inflation 
D) all of the above 
E) none of the above 
A) formed by looking at the future 
B) likely to change rapidly 
C) based on past inflation 
D) all of the above 
E) none of the above C

Question 2

The idea behind the Phillips curve is that ________.

Accepted Answer

A) tight labor markets lead to inflationary pressures 
B) when the unemployment rate is low,wages will increase 
C) when firms raise wages to attract new workers,prices will also increase 
D) all of the above 
E) none of the above 
A) tight labor markets lead to inflationary pressures 
B) when the unemployment rate is low,wages will increase 
C) when firms raise wages to attract new workers,prices will also increase 
D) all of the above 
E) none of the above D

Question 3

In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy.Many refineries went offline disrupting oil refining and distribution.What do you think was a likely result?

Accepted Answer

A) the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right 
B) the restricted supply constituted a cost push shock that would have shifted the short run AS curve to the left 
C) the restricted supply constituted a cost push shock that would have meant an upward movement along the Phillips curve 
D) all of the above 
E) none of the above 
A) the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right 
B) the restricted supply constituted a cost push shock that would have shifted the short run AS curve to the left 
C) the restricted supply constituted a cost push shock that would have meant an upward movement along the Phillips curve 
D) all of the above 
E) none of the above B

Question 4

________ is (are)the endogenous variable(s)in the Phillips curve.

Accepted Answer

A) Expected inflation 
B) Inflation 
C) The natural rate of unemployment 
D) all of the above 
E) none of the above 
A) Expected inflation 
B) Inflation 
C) The natural rate of unemployment 
D) all of the above 
E) none of the above

Question 5

The short-run aggregate supply curve shows that inflation will change as a result of changes in ________.

Accepted Answer

A) output 
B) potential output 
C) expected inflation 
D) price shocks 
E) all of the above 
A) output 
B) potential output 
C) expected inflation 
D) price shocks 
E) all of the above

Question 6

If expectations about inflation are adaptive,they are ________.

Accepted Answer

A) not based on all available,relevant information 
B) backward-looking 
C) likely to change slowly 
D) all of the above 
E) none of the above 
A) not based on all available,relevant information 
B) backward-looking 
C) likely to change slowly 
D) all of the above 
E) none of the above

Question 7

Why is there no long-run trade-off between unemployment and inflation?

Accepted Answer

Because when the labor market is so tigh

Question 8

What factors cause a shift in the long-run aggregate supply curve? Might any of these cause the short-run aggregate supply curve to shift,also?

Accepted Answer

The factors that shift the long-run aggr

Question 9

If the short-run aggregate supply curve is π =   + 1.2 (Y -   )+ ρ,output equals potential output and there is a price shock of minus two,then the inflation rate is ________.

Accepted Answer

A) 2 
B)    - 2 
C) minus 2 
D) minus 2.4 
E) none of the above 
A) 2 
B)    - 2 
C) minus 2 
D) minus 2.4 
E) none of the above

Question 10

-Based on the graph above,the short-run aggregate supply curve is ________.

Accepted Answer

A) π = 2 + 1.5 (Y - 10)+ ρ 
B) Y = 8   +
  (π)+ ρ 
C) π = 2 + (Y - 11)+ ρ 
D) π = 3.5 + 2 (Y - 10)+ ρ 
E) none of the above 
A) π = 2 + 1.5 (Y - 10)+ ρ 
B) Y = 8   +
  (π)+ ρ 
C) π = 2 + (Y - 11)+ ρ 
D) π = 3.5 + 2 (Y - 10)+ ρ 
E) none of the above

Question 11

Which of the following might cause an upward shift of the modern Phillips curve?

Accepted Answer

A) an increase in oil prices 
B) an increase in the price of imports 
C) wage agreements that include compensation for inflation 
D) all of the above 
E) none of the above 
A) an increase in oil prices 
B) an increase in the price of imports 
C) wage agreements that include compensation for inflation 
D) all of the above 
E) none of the above

Question 12

In the short run ________.

Accepted Answer

A) inflation is negatively related to the output gap 
B) if output rises above its potential level,the unemployment rate falls and firms will lower wages 
C) if the labor market tightens,firms will raise prices more rapidly to keep up with upward wage pressures and inflation will ensue 
D) all of the above 
E) none of the above 
A) inflation is negatively related to the output gap 
B) if output rises above its potential level,the unemployment rate falls and firms will lower wages 
C) if the labor market tightens,firms will raise prices more rapidly to keep up with upward wage pressures and inflation will ensue 
D) all of the above 
E) none of the above

Question 13

Which of the following best approximates Okun's law?

Accepted Answer

A) a 1 percent increase in output leads to a 2 percent decrease in unemployment 
B) a 1 percent increase in output leads to a 1 percent decrease in unemployment 
C) a 2 percent increase in output leads to a 4 percent increase in unemployment 
D) a 2 percent increase in output leads to a 1 percent decrease in unemployment 
E) none of the above 
A) a 1 percent increase in output leads to a 2 percent decrease in unemployment 
B) a 1 percent increase in output leads to a 1 percent decrease in unemployment 
C) a 2 percent increase in output leads to a 4 percent increase in unemployment 
D) a 2 percent increase in output leads to a 1 percent decrease in unemployment 
E) none of the above

Question 14

In the 1960s,the Phillips curve was ________.

Accepted Answer

A) consistent with a positive relationship between inflation and unemployment 
B) suggestive of a temporary trade off between inflation and unemployment 
C) a very popular explanation for inflation fluctuations 
D) all of the above 
E) none of the above 
A) consistent with a positive relationship between inflation and unemployment 
B) suggestive of a temporary trade off between inflation and unemployment 
C) a very popular explanation for inflation fluctuations 
D) all of the above 
E) none of the above

Question 15

Suppose the output gap is zero,and policy makers wish to reduce the inflation rate from 10 percent to 5 percent.Which of these policies seems best?

Accepted Answer

A) contractionary policies to reduce output at least 5 percent below potential output 
B) a convincing declaration of the inflation rate target,so that expected inflation falls to 5 percent 
C) no policy action;inflation will fall on its own,eventually 
D) no policy action;inflation will converge to its long-run rate,regardless of policy 
E) price and wage controls to counteract their stickiness 
A) contractionary policies to reduce output at least 5 percent below potential output 
B) a convincing declaration of the inflation rate target,so that expected inflation falls to 5 percent 
C) no policy action;inflation will fall on its own,eventually 
D) no policy action;inflation will converge to its long-run rate,regardless of policy 
E) price and wage controls to counteract their stickiness

Question 16

Given the accelerationist Phillips curve Δπ = - 0.3 (U - 6)+ ρ,suppose that inflation in the preceding period was 3 percent,unemployment is 7 percent,and there is no price shock.The current inflation rate is ________.

Accepted Answer

A) 2.7 percent 
B) 3 percent 
C) 0.9 percent 
D) 3.3 percent 
E) none of the above 
A) 2.7 percent 
B) 3 percent 
C) 0.9 percent 
D) 3.3 percent 
E) none of the above

Question 17

If the natural rate of unemployment declines ________.

Accepted Answer

A) labor is more heavily utilized 
B) potential output increases 
C) the long run aggregate supply curve shifts to the right 
D) all of the above 
E) none of the above 
A) labor is more heavily utilized 
B) potential output increases 
C) the long run aggregate supply curve shifts to the right 
D) all of the above 
E) none of the above

Question 18

An example of a price shock is ________.

Accepted Answer

A) an increase in wages as a result of higher expected inflation 
B) the arrival of immigrants seeking employment 
C) the decline in autonomous spending that results from rising unemployment 
D) all of the above 
E) none of the above 
A) an increase in wages as a result of higher expected inflation 
B) the arrival of immigrants seeking employment 
C) the decline in autonomous spending that results from rising unemployment 
D) all of the above 
E) none of the above

Question 19

Technological advances lead to ________.

Accepted Answer

A) a shift of the short run AS curve up 
B) a shift of the long run AS curve to the left 
C) an upward movement along the long run AS curve 
D) all of the above 
E) none of the above 
A) a shift of the short run AS curve up 
B) a shift of the long run AS curve to the left 
C) an upward movement along the long run AS curve 
D) all of the above 
E) none of the above

Question 20

If Okun's law is U -   = - 0.6 (Y -   ),and the Phillips curve is π =   - 2.5 (U -   )+ ρ,then the short-run aggregate supply curve is ________.

Accepted Answer

A) π =   + 1.5 (Y -
  )+ ρ 
B) π =   + 4.2 (Y -
  )+ ρ 
C) π =   - 2.5 (Y -
  )+ ρ 
D) π =   - 2.5 (Y +
  )+ ρ 
E) none of the above 
A) π =   + 1.5 (Y -
  )+ ρ 
B) π =   + 4.2 (Y -
  )+ ρ 
C) π =   - 2.5 (Y -
  )+ ρ 
D) π =   - 2.5 (Y +
  )+ ρ 
E) none of the above

Exam 11: Aggregate Supply and the Phillips Curve

If expectations about inflation are adaptive,they are ________.

The idea behind the Phillips curve is that ________.

In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy.Many refineries went offline disrupting oil refining and distribution.What do you think was a likely result?

________ is (are)the endogenous variable(s)in the Phillips curve.

The short-run aggregate supply curve shows that inflation will change as a result of changes in ________.

If expectations about inflation are adaptive,they are ________.

Why is there no long-run trade-off between unemployment and inflation?

What factors cause a shift in the long-run aggregate supply curve? Might any of these cause the short-run aggregate supply curve to shift,also?

If the short-run aggregate supply curve is π = + 1.2 (Y - )+ ρ,output equals potential output and there is a price shock of minus two,then the inflation rate is ________.

-Based on the graph above,the short-run aggregate supply curve is ________.

Which of the following might cause an upward shift of the modern Phillips curve?

In the short run ________.

Which of the following best approximates Okun's law?

In the 1960s,the Phillips curve was ________.

Suppose the output gap is zero,and policy makers wish to reduce the inflation rate from 10 percent to 5 percent.Which of these policies seems best?

Given the accelerationist Phillips curve Δπ = - 0.3 (U - 6)+ ρ,suppose that inflation in the preceding period was 3 percent,unemployment is 7 percent,and there is no price shock.The current inflation rate is ________.

If the natural rate of unemployment declines ________.

An example of a price shock is ________.

Technological advances lead to ________.

If Okun's law is U - = - 0.6 (Y - ),and the Phillips curve is π = - 2.5 (U - )+ ρ,then the short-run aggregate supply curve is ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

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