Question 1

Along any aggregate supply curve, there is only one:

Accepted Answer

A)  unemployment level. 
B)  expected price level. 
C)  inflation level. 
D)  output level.

Question 2

Each of the following phenomena hinders the precise estimation of the natural rate of unemployment except:

Accepted Answer

A)  supply shocks such as oil price increases. 
B)  demographic changes such as the aging baby boomers. 
C)  policy changes such as minimum wage increases. 
D)  introduction of new products such as DVD players.

Question 3

According to the imperfect-information model, when the price level is greater than the expected price level, output will _____ the natural level of output

Accepted Answer

A)  be greater than 
B)  be less than 
C)  be equal to 
D)  shift the

Question 4

According to the imperfect-information model, in countries in which there is a great deal of variability of prices:

Accepted Answer

A)  the response of output to unexpected changes in prices will be relatively large. 
B)  the response of output to unexpected changes in prices will be relatively small. 
C)  output will respond negatively to an unexpected rise in prices. 
D)  output will not respond to an unexpected change in prices.

Question 5

All of the following are ways that the modern Phillips curve differs from the relationship observed by A. W. Phillips in 1958 except that the modern Phillips curve:

Accepted Answer

A)  substitutes the output gap for unemployment. 
B)  includes supply shocks. 
C)  includes expected inflation. 
D)  substitutes price inflation for wage inflation.

Question 6

Based on the sticky-price model, the short-run aggregate supply curve will be steeper, the greater the:

Accepted Answer

A)  target nominal-wage rate. 
B)  target real-wage rate. 
C)  proportion of firms with flexible prices. 
D)  proportion of firms with sticky prices.

Question 7

Use the following to answer questions :
Exhibit: AD-AS Shifts 
-(Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to $\bar { Y }$ and the price level equal to P1, a demand-pull inflation would be represented by a shift from:

Accepted Answer

A)  AD1 to AD2 
B)  AD1 to AD3 
C)  AS1 to AS2 
D)  AS1 to AS3

Question 8

An economy is initially in equilibrium at the natural level. The central bank increases the money supply. Graphically illustrate and explain short-run monetary nonneutrality and long-run monetary neutrality using the AD-AS model.

Accepted Answer

The answer of An economy is initially in equilibrium at...

Question 9

The hypothesis that hysteresis may play an important role in macroeconomics implies, among other things, that:

Accepted Answer

A)  the history of economic thought is important to macroeconomics. 
B)  workers get hysterical during long depressions. 
C)  hysteresis lowers the sacrifice ratio. 
D)  the natural rate of unemployment may increase if unemployment is high for a long period of time.

Question 10

Explain the economist Robert Lucas's view on the imperfect-information model?

Accepted Answer

The answer of Explain the economist Robert Lucas's view on...

Question 11

Inflation inertia is represented in the aggregate supply-aggregate demand model by continuing upward shifts in the:

Accepted Answer

A)  aggregate demand curve. 
B)  short-run aggregate supply curve. 
C)  long-run aggregate supply curve. 
D)  aggregate demand and short-run aggregate supply curves.

Question 12

Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to ______ in the short run; and in the long run the expected price level will ______, causing the level of output to return to the natural level.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; increase

Question 13

To illustrate inflation inertia in an aggregate demand-aggregate supply model, the short-run aggregate supply curve shifts upward because of increases in ______, and the aggregate demand curve shifts upward because of increases in ______.

Accepted Answer

A)  the expected price level; the money supply 
B)  the money supply; the expected price level 
C)  output; the price level 
D)  the price level; output

Question 14

The short-run Phillips curve:

Accepted Answer

A)  shifts upward if expected inflation increases. 
B)  shifts upward if expected inflation decreases. 
C)  shifts downward if expected inflation increases. 
D)  is vertical.

Question 15

If price expectations are assumed to be correct, money demand is proportional to income, and there are no international capital flows, then the mother of all models in the Appendix to Chapter 14 corresponds to which of the following special cases?

Accepted Answer

A)  classical closed economy 
B)  classical open economy 
C)  IS-LM model 
D)  Mundell-Fleming model with floating exchange rate

Question 16

The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:

Accepted Answer

A)  Okun's law. 
B)  the cold-turkey approach. 
C)  the natural-rate hypothesis. 
D)  hysteresis.

Question 17

The percentage of a year's real GDP that must be foregone to reduce inflation by 1 percentage point is called the:

Accepted Answer

A)  NAIRU. 
B)  short-run Phillips curve. 
C)  sacrifice ratio. 
D)  Okun's law.

Question 18

Based on the Phillips curve, unexpected movements in inflation are related to ______, and based on the short-run aggregate supply curve, unexpected movements in the price level are related to ______.

Accepted Answer

A)  sticky wages; sticky prices 
B)  sticky prices; sticky wages 
C)  output; unemployment 
D)  unemployment; output

Question 19

When adaptive expectations are used to model inflation expectations in the Phillips curve, then the natural rate of unemployment is called the ______ rate of unemployment.

Accepted Answer

A)  structural 
B)  cyclical 
C)  short-run aggregate supply 
D)  nonaccelerating inflation

Question 20

Use the aggregate demand-aggregate supply model to graphically illustrate the difference between demand-pull and cost-push inflation. Explain your graphs in words.

Accepted Answer

The answer of Use the aggregate demand-aggregate supply model to...

Exam 14: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Along any aggregate supply curve, there is only one:

Each of the following phenomena hinders the precise estimation of the natural rate of unemployment except:

According to the imperfect-information model, when the price level is greater than the expected price level, output will _____ the natural level of output

According to the imperfect-information model, in countries in which there is a great deal of variability of prices:

All of the following are ways that the modern Phillips curve differs from the relationship observed by A. W. Phillips in 1958 except that the modern Phillips curve:

Based on the sticky-price model, the short-run aggregate supply curve will be steeper, the greater the:

An economy is initially in equilibrium at the natural level. The central bank increases the money supply. Graphically illustrate and explain short-run monetary nonneutrality and long-run monetary neutrality using the AD-AS model.

The hypothesis that hysteresis may play an important role in macroeconomics implies, among other things, that:

Explain the economist Robert Lucas's view on the imperfect-information model?

Inflation inertia is represented in the aggregate supply-aggregate demand model by continuing upward shifts in the:

Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to in the short run; and in the long run the expected price level will , causing the level of output to return to the natural level.

To illustrate inflation inertia in an aggregate demand-aggregate supply model, the short-run aggregate supply curve shifts upward because of increases in , and the aggregate demand curve shifts upward because of increases in .

The short-run Phillips curve:

If price expectations are assumed to be correct, money demand is proportional to income, and there are no international capital flows, then the mother of all models in the Appendix to Chapter 14 corresponds to which of the following special cases?

The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:

The percentage of a year's real GDP that must be foregone to reduce inflation by 1 percentage point is called the:

Based on the Phillips curve, unexpected movements in inflation are related to , and based on the short-run aggregate supply curve, unexpected movements in the price level are related to .

When adaptive expectations are used to model inflation expectations in the Phillips curve, then the natural rate of unemployment is called the ______ rate of unemployment.

Use the aggregate demand-aggregate supply model to graphically illustrate the difference between demand-pull and cost-push inflation. Explain your graphs in words.

Exam 14: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Along any aggregate supply curve, there is only one:

Each of the following phenomena hinders the precise estimation of the natural rate of unemployment except:

According to the imperfect-information model, when the price level is greater than the expected price level, output will _____ the natural level of output

According to the imperfect-information model, in countries in which there is a great deal of variability of prices:

All of the following are ways that the modern Phillips curve differs from the relationship observed by A. W. Phillips in 1958 except that the modern Phillips curve:

Based on the sticky-price model, the short-run aggregate supply curve will be steeper, the greater the:

Use the following to answer questions : Exhibit: AD-AS Shifts -(Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to Yˉ\bar { Y }Yˉ and the price level equal to P1, a demand-pull inflation would be represented by a shift from:

An economy is initially in equilibrium at the natural level. The central bank increases the money supply. Graphically illustrate and explain short-run monetary nonneutrality and long-run monetary neutrality using the AD-AS model.

The hypothesis that hysteresis may play an important role in macroeconomics implies, among other things, that:

Explain the economist Robert Lucas's view on the imperfect-information model?

Inflation inertia is represented in the aggregate supply-aggregate demand model by continuing upward shifts in the:

Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to ______ in the short run; and in the long run the expected price level will ______, causing the level of output to return to the natural level.

To illustrate inflation inertia in an aggregate demand-aggregate supply model, the short-run aggregate supply curve shifts upward because of increases in ______, and the aggregate demand curve shifts upward because of increases in ______.

The short-run Phillips curve:

If price expectations are assumed to be correct, money demand is proportional to income, and there are no international capital flows, then the mother of all models in the Appendix to Chapter 14 corresponds to which of the following special cases?

The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:

The percentage of a year's real GDP that must be foregone to reduce inflation by 1 percentage point is called the:

Based on the Phillips curve, unexpected movements in inflation are related to ______, and based on the short-run aggregate supply curve, unexpected movements in the price level are related to ______.

When adaptive expectations are used to model inflation expectations in the Phillips curve, then the natural rate of unemployment is called the ______ rate of unemployment.

Use the aggregate demand-aggregate supply model to graphically illustrate the difference between demand-pull and cost-push inflation. Explain your graphs in words.

Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to in the short run; and in the long run the expected price level will , causing the level of output to return to the natural level.

To illustrate inflation inertia in an aggregate demand-aggregate supply model, the short-run aggregate supply curve shifts upward because of increases in , and the aggregate demand curve shifts upward because of increases in .

Based on the Phillips curve, unexpected movements in inflation are related to , and based on the short-run aggregate supply curve, unexpected movements in the price level are related to .