Question 1

According to the long-run Phillips curve, which of the following will be the end result of an expansionary monetary policy when unemployment is at its natural rate?

Accepted Answer

A) Zero inflation 
B) Deflation 
C) A constant level of potential real GDP 
D) A decrease in unemployment 
E) An increase in unemployment

Question 2

A sudden technological breakthrough in an economy would:

Accepted Answer

A) have no impact on real GDP. 
B) cause aggregate demand to fall. 
C) lower the natural rate of unemployment. 
D) increase the price level. 
E) cause aggregate supply to rise.

Question 3

The figure given below depicts the long run equilibrium in an economy. Figure 14.1  In the figure:
AD1 and AD2: Aggregate demand curves
AS1 and AS2: Aggregate supply curves
Refer to Figure 14.1.The movement from point A to point B to point C results in:

Accepted Answer

A) a constant price level and a decline in the natural rate of unemployment. 
B) a rightward shift of the short-run Phillips curve. 
C) a lower price level and no change in the natural rate of unemployment. 
D) a movement up the short-run Phillips curve. 
E) a lower price level and a decline in the natural rate of unemployment.

Question 4

If the actual unemployment rate is below the natural rate of unemployment, then the actual inflation rate must exceed the expected inflation rate, and the economy will be operating along the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 5

When workers expect more inflation than actually occurs:

Accepted Answer

A) the Phillips curve becomes vertical. 
B) the long-run Phillips curve shifts to the right. 
C) the short-run Phillips curve shifts to the left. 
D) there will be a movement down the short-run Phillips curve. 
E) there will be a movement up the short-run Phillips curve.

Question 6

If the Fed follows a high-growth monetary policy, but workers believe that the policy is time inconsistent, then low-wage contracts will be in force and unemployment will decline.

Accepted Answer

A) True 
 B)False

Question 7

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

Accepted Answer

A) $10 billion. 
B) $15 billion. 
C) $20 billion. 
D) $35 billion. 
E) $45 billion.

Question 8

Consider a nation experiencing the relationship illustrated by the short run Phillips curve.An increase in both unemployment and inflation in this nation over the next ten years can be explained by:

Accepted Answer

A) a movement down along the short-run Phillips curve. 
B) a series of outward shifts of the short-run Phillips curve. 
C) a movement up along the short-run Phillips curve 
D) a series of inward shifts of the short-run Phillips curve. 
E) a complete change in the slope of the Phillips curve.

Question 9

The hypothesis of political business cycles is based on the assumption that a vertical Phillips curve always holds.

Accepted Answer

A) True 
 B)False

Question 10

If credible low-money-growth policies were continually pursued by the Fed, nominal wages and prices would eventually fall as the economic agents would expect lower inflation rates over time.

Accepted Answer

A) True 
 B)False

Question 11

Irrespective of whether the inflation rate is high or low, if the inflation rate is above the expected level, the unemployment rate in the economy will remain stable.

Accepted Answer

A) True 
 B)False

Question 12

The figure given below depicts the long run equilibrium in an economy. Figure 14.1  In the figure:
AD1 and AD2: Aggregate demand curves
AS1 and AS2: Aggregate supply curves
Refer to Figure 14.1.Movement from point A to point C is equivalent to:

Accepted Answer

A) a movement up the long-run Phillips curve. 
B) an outward shift of the short-run Phillips curve. 
C) a movement up the short-run Phillips curve. 
D) an inward shift of the long-run Phillips curve. 
E) a movement down the long-run Phillips curve.

Exam 23: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

According to the long-run Phillips curve, which of the following will be the end result of an expansionary monetary policy when unemployment is at its natural rate?

A sudden technological breakthrough in an economy would:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves Refer to Figure 14.1.The movement from point A to point B to point C results in:

If the actual unemployment rate is below the natural rate of unemployment, then the actual inflation rate must exceed the expected inflation rate, and the economy will be operating along the short-run Phillips curve.

When workers expect more inflation than actually occurs:

If the Fed follows a high-growth monetary policy, but workers believe that the policy is time inconsistent, then low-wage contracts will be in force and unemployment will decline.

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

Consider a nation experiencing the relationship illustrated by the short run Phillips curve.An increase in both unemployment and inflation in this nation over the next ten years can be explained by:

The hypothesis of political business cycles is based on the assumption that a vertical Phillips curve always holds.

If credible low-money-growth policies were continually pursued by the Fed, nominal wages and prices would eventually fall as the economic agents would expect lower inflation rates over time.

Irrespective of whether the inflation rate is high or low, if the inflation rate is above the expected level, the unemployment rate in the economy will remain stable.

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves Refer to Figure 14.1.Movement from point A to point C is equivalent to:

Exam 23: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

According to the long-run Phillips curve, which of the following will be the end result of an expansionary monetary policy when unemployment is at its natural rate?

A sudden technological breakthrough in an economy would:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD1 and AD2: Aggregate demand curves AS1 and AS2: Aggregate supply curves Refer to Figure 14.1.The movement from point A to point B to point C results in:

If the actual unemployment rate is below the natural rate of unemployment, then the actual inflation rate must exceed the expected inflation rate, and the economy will be operating along the short-run Phillips curve.

When workers expect more inflation than actually occurs:

If the Fed follows a high-growth monetary policy, but workers believe that the policy is time inconsistent, then low-wage contracts will be in force and unemployment will decline.

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

Consider a nation experiencing the relationship illustrated by the short run Phillips curve.An increase in both unemployment and inflation in this nation over the next ten years can be explained by:

The hypothesis of political business cycles is based on the assumption that a vertical Phillips curve always holds.

If credible low-money-growth policies were continually pursued by the Fed, nominal wages and prices would eventually fall as the economic agents would expect lower inflation rates over time.

Irrespective of whether the inflation rate is high or low, if the inflation rate is above the expected level, the unemployment rate in the economy will remain stable.

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD1 and AD2: Aggregate demand curves AS1 and AS2: Aggregate supply curves Refer to Figure 14.1.Movement from point A to point C is equivalent to:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves Refer to Figure 14.1.The movement from point A to point B to point C results in:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves Refer to Figure 14.1.Movement from point A to point C is equivalent to: