Question 1

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Accepted Answer

A)   It would shift the long-run Phillips curve right.
B)   It would shift the long-run Phillips curve left.
C)   There would be an upward movement along a given long-run Phillips curve.
D)   There would be a downward movement along a given long-run Philips curve.E) B) and C)
F) C) and D)

Question 2

Just as the aggregate-demand curve slopes downward only in the short run, the trade-off between inflation and unemployment holds only in the long run.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following would reduce the natural rate of unemployment?

Accepted Answer

A)   both an increase in the rate of money growth and increased unemployment compensation
B)   an increase in the rate of money growth but not increased unemployment compensation
C)   an increase in unemployment compensation but not an increase in the rate of money growth.
D)   neither an increase in unemployment compensation nor an increase in the rate of money growth.E) A) and B)
F) A) and C)

Question 4

In 1979, when the Fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was

Accepted Answer

A)   1.
B)   5.
C)   7.
D)   10.E) B) and D)
F) None of the above

Question 5

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. Curve 2 is the

Accepted Answer

A)   long-run Phillips curve.
B)   short-run Phillips curve.
C)   long-run aggregate demand curve.
D)   short-run aggregate demand curve.E) C) and D)
F) A) and C)

Question 6

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Accepted Answer

A)   both the natural rate of unemployment and the inflation rate
B)   the natural rate of unemployment, but not the inflation rate
C)   the inflation rate, but not the natural rate of unemployment
D)   neither the natural unemployment rate nor the inflation rateE) A) and D)
F) B) and C)

Question 7

If a central bank reduced inflation by 4 percentage points and this made output fall by 5 percent for one year and 3 percent for another year and the unemployment rate rise 2.5 percent above its natural rate for one year and 1.5 percent above its natural rate for another year, the sacrifice ratio was

Accepted Answer

A)   1.
B)   2.
C)   3.
D)   None of the above is correct.E) A) and B)
F) B) and D)

Question 8

An increase in expected inflation shifts

Accepted Answer

A)   the long-run Phillips curve right.
B)   the short-run Phillips curve right.
C)   neither the short-run nor long-run Phillips curve right.
D)   both the short-run and long-run Phillips curve right.E) C) and D)
F) None of the above

Question 9

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Accepted Answer

A)   right and the sacrifice ratio would fall.
B)   right and the sacrifice ratio would rise.
C)   left and the sacrifice ratio would fall.
D)   left and the sacrifice ratio would rise.E) B) and C)
F) A) and C)

Question 10

Refer to Monetary Policy in Mokania. The Bank of Mokania reduced inflation to its announced goal of 5%. However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year. Which of the following is correct?

Accepted Answer

A)   Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 3.
B)   Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 1.
C)   Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 3.
D)   Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 1.E) C) and D)
F) A) and B)

Question 11

In the late 1970s, proponents of rational expectations argued that

Accepted Answer

A)   the Fed should not attempt to aggressively fight inflation.
B)   the sacrifice ratio was smaller than previously thought.
C)   the short run was relatively long.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 12

If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower

Accepted Answer

A)   in the long run and the short run.
B)   in the long run but not the short run.
C)   in the short run but not the long run.
D)   in neither the short run nor the long run.E) B) and D)
F) A) and C)

Question 13

In response to the financial crisis of 2007-2008, policymakers used

Accepted Answer

A)   expansionary monetary policy and expansionary fiscal policy.
B)   expansionary monetary policy and contractionary fiscal policy.
C)   contractionary monetary policy and expansionary fiscal policy.
D)   contractionary monetary policy and contractionary fiscal policy.E) C) and D)
F) A) and B)

Question 14

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Accepted Answer

A downward-sloping Phillips curve implie...

Question 15

What is meant by accommodation?

Accepted Answer

A central bank is said to acco...

Question 16

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Accepted Answer

A)   downward-sloping, which implies that monetary and fiscal policies can influence the level of unemployment in the long run.
B)   downward-sloping, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.
C)   vertical, which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run.
D)   vertical, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.E) All of the above
F) A) and C)

Question 17

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Accepted Answer

A)   shift both the short-run aggregate supply and the short-run Phillips curve right.
B)   shift both the short-run aggregate supply and the short-run Phillips curve left.
C)   shift the short-run aggregate supply curve to the right, and the short-run Phillips curve to the left.
D)   shift the short-run aggregate supply curve to the left, and the short-run Phillips curve to the right.E) A) and B)
F) All of the above

Question 18

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD)  curves. On the right-hand diagram, U represents the unemployment rate.
  
-Refer to Figure 35-1. The curve that is depicted on the right­hand graph offers policymakers a "menu" of combinations

Accepted Answer

A)   that applies both in the short run and in the long run.
B)   that is relevant to choices involving fiscal policy, but not to choices involving monetary policy.
C)   of inflation and unemployment.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 19

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)   the unemployment rate will be below its natural rate whenever inflation is negative.
B)   the unemployment rate will be below its natural rate whenever inflation is positive.
C)   the unemployment rate will be below its natural rate only if inflation is less than expected.
D)   the unemployment rate will be below its natural rate only if inflation is greater than expected.E) All of the above
F) B) and C)

Question 20

In the long run, a decrease in the money supply growth rate

Accepted Answer

A)   shifts both the long-run and the short-run Phillips curves right.
B)   shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)   shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)   None of the above is correct.E) B) and C)
F) C) and D)

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

An increase in expected inflation shifts

Correct Answer
verified

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct Answer
verified

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Correct Answer
verified

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. Curve 2 is the

Correct Answer
verified

Refer to Monetary Policy in Mokania. The Bank of Mokania reduced inflation to its announced goal of 5%. However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year. Which of the following is correct?

Correct Answer
verified

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Correct Answer
verified

Just as the aggregate-demand curve slopes downward only in the short run, the trade-off between inflation and unemployment holds only in the long run.

Correct Answer
verified

According to Friedman and Phelps's analysis of the Phillips curve,

Correct Answer
verified

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 35-1. The curve that is depicted on the righthand graph offers policymakers a "menu" of combinations

Correct Answer
verified

In response to the financial crisis of 2007-2008, policymakers used

Correct Answer
verified

In 1979, when the Fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was

Correct Answer
verified

What is meant by accommodation?

Correct Answer
verified
A central bank is said to acco...
View Answer

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct Answer
verified
A downward-sloping Phillips curve implie...
View Answer

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Correct Answer
verified

Correct Answer
verified

In the long run, a decrease in the money supply growth rate

Correct Answer
verified

If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower

Correct Answer
verified

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Correct Answer
verified

Which of the following would reduce the natural rate of unemployment?

Correct Answer
verified

In the late 1970s, proponents of rational expectations argued that

Correct Answer
verified

Exam 22: The Short-Run Trade-Off Between Inflation and Unemployment

An increase in expected inflation shifts

Correct AnswerverifiedShow Answer

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

Correct AnswerverifiedShow Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. Curve 2 is the

Correct AnswerverifiedShow Answer

Refer to Monetary Policy in Mokania. The Bank of Mokania reduced inflation to its announced goal of 5%. However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year. Which of the following is correct?

Correct AnswerverifiedShow Answer

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Correct AnswerverifiedShow Answer

Just as the aggregate-demand curve slopes downward only in the short run, the trade-off between inflation and unemployment holds only in the long run.

Correct AnswerverifiedShow Answer

According to Friedman and Phelps's analysis of the Phillips curve,

Correct AnswerverifiedShow Answer

Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 35-1. The curve that is depicted on the right­hand graph offers policymakers a "menu" of combinations

Correct AnswerverifiedShow Answer

In response to the financial crisis of 2007-2008, policymakers used

Correct AnswerverifiedShow Answer

In 1979, when the Fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was

Correct AnswerverifiedShow Answer

What is meant by accommodation?

Correct AnswerverifiedA central bank is said to acco...View AnswerShow Answer

Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?

Correct AnswerverifiedA downward-sloping Phillips curve implie...View AnswerShow Answer

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the long run, a decrease in the money supply growth rate

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower

Correct AnswerverifiedShow Answer

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Correct AnswerverifiedShow Answer

Which of the following would reduce the natural rate of unemployment?

Correct AnswerverifiedShow Answer

In the late 1970s, proponents of rational expectations argued that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Figure 35-1. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, U represents the unemployment rate. -Refer to Figure 35-1. The curve that is depicted on the righthand graph offers policymakers a "menu" of combinations

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A central bank is said to acco...
View Answer

Correct Answer
verified
A downward-sloping Phillips curve implie...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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