Question 1

As aggregate demand shifts right along the aggregate supply curve,

Accepted Answer

A)   inflation and unemployment are higher.
B)   inflation is higher and unemployment is lower.
C)   unemployment is higher and inflation is lower.
D)   unemployment and inflation are lower.E) A) and C)
F) A) and B)

Question 2

Figure 35-4
Use the graph below to answer the following questions. 
-Refer to Figure 35-4.The money supply growth rate is greatest at

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   F.E) A) and D)
F) B) and D)

Question 3

In the long run,if the Fed increases the rate at which it increases the money supply,

Accepted Answer

A)   inflation will be higher.
B)   unemployment will be lower.
C)   real GDP will be higher.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 4

An adverse supply shock causes inflation to

Accepted Answer

A)   rise and the short-run Phillips curve to shift right.
B)   rise and the short-run Phillips curve to shift left.
C)   fall and the short-run Phillips curve to shift right.
D)   fall and the short-run Phillips curve to shift left.E) C) and D)
F) B) and C)

Question 5

A decrease in expected inflation shifts

Accepted Answer

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

Question 6

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Accepted Answer

A)   both the short and long run.
B)   the short run,but not the long run.
C)   the long run,but not the short run.
D)   neither the short nor the long run.E) All of the above
F) A) and B)

Question 7

A favorable supply shock will cause the price level

Accepted Answer

A)   and output to rise.
B)   and output to fall.
C)   to rise and output to fall.
D)   to fall and output to rise.E) A) and B)
F) B) and D)

Question 8

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Accepted Answer

A) True 
 B)False

Question 9

In the long run,an increase in the money supply growth rate

Accepted Answer

A)   raises expected inflation so the short-run Phillips curve shifts right.
B)   raises expected inflation so the short-run Phillips curve shifts left.
C)   reduces expected inflation so the short-run Phillips curve shifts left.
D)   None of the above is correct.E) A) and D)
F) B) and C)

Question 10

Proponents of rational expectations theory argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations,the sacrifice ratio could be as small as

Accepted Answer

A)   0
B)   1
C)   4
D)   5E) A) and C)
F) A) and B)

Question 11

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Accepted Answer

A)   Unemployment Rate = Natural Rate of Unemployment - a(Actual Inflation - Expected Inflation) .
B)   Unemployment Rate = Natural Rate of Unemployment - a(Expected Inflation - Actual Inflation) .
C)   Unemployment Rate = Expected Rate of Inflation - a(Actual Inflation - Expected Inflation) .
D)   Unemployment Rate = Actual Rate of Inflation - a(Actual Unemployment - Expected Unemployment) .E) All of the above
F) None of the above

Question 12

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%.Suppose that the public had expected that the Department of Finance would reduce inflation,but only to 20%.Then

Accepted Answer

A)   unemployment falls,but it would have fallen more if people had been expecting 12.5% inflation.
B)   unemployment falls,but it would have fallen more if people had been expecting 22% inflation.
C)   unemployment rises,but it would have risen more if people had been expecting 12.5% inflation.
D)   unemployment rises,but it would have risen more if people had been expecting 22% inflation.E) A) and B)
F) A) and C)

Question 13

If there is a temporary adverse supply shock,then the short-run Phillips curve shifts

Accepted Answer

A)   right.It remains to the right regardless of monetary policy.
B)   right.It remains to the right if the central bank pursues expansionary monetary policy.
C)   left.It remains to the left regardless of monetary policy.
D)   left.It remains to the left if the central bank pursues expansionary monetary policy.E) B) and C)
F) A) and C)

Question 14

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) None of the above
F) B) and D)

Question 15

Other things the same,if there is an increase in the money supply growth rate that is larger than expected,then in the short run

Accepted Answer

A)   the natural rate of unemployment rises.
B)   the natural rate of unemployment falls.
C)   the unemployment rate will be above its natural rate.
D)   the unemployment rate will be below its natural rate.E) None of the above
F) A) and D)

Question 16

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) None of the above
F) A) and D)

Question 17

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to the Economy in 2008.The effects of increased prices of world commodities is shown by shifting

Accepted Answer

A)   aggregate demand to the right.
B)   aggregate demand to the left.
C)   aggregate supply to the right.
D)   aggregate supply to the left.E) A) and C)
F) B) and C)

Question 18

Which of the following is correct if there is an adverse supply shock?

Accepted Answer

A)   The short-run aggregate supply curve and the short-run Phillips curve both shift right.
B)   The short-run aggregate supply curve and the short-run Phillips curve both shift left.
C)   The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
D)   The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.E) C) and D)
F) A) and B)

Question 19

Figure 35-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Accepted Answer

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

Question 20

Figure 35-5
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-5.Starting from C and 3,in the short run an unexpected increase in money supply growth moves the economy to

Accepted Answer

A)   A and 1.
B)   B and 2.
C)   back to C and 3.
D)   D and 4.E) B) and C)
F) None of the above

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

If there is a temporary adverse supply shock,then the short-run Phillips curve shifts

Correct Answer
verified

A decrease in expected inflation shifts

Correct Answer
verified

An adverse supply shock causes inflation to

Correct Answer
verified

A favorable supply shock will cause the price level

Correct Answer
verified

Correct Answer
verified

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Correct Answer
verified

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

Which of the following is correct if there is an adverse supply shock?

Correct Answer
verified

In the long run,an increase in the money supply growth rate

Correct Answer
verified

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Correct Answer
verified

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct Answer
verified

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.The money supply growth rate is greatest at

Correct Answer
verified

Proponents of rational expectations theory argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations,the sacrifice ratio could be as small as

Correct Answer
verified

In the long run,if the Fed increases the rate at which it increases the money supply,

Correct Answer
verified

As aggregate demand shifts right along the aggregate supply curve,

Correct Answer
verified

Figure 35-5 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-5.Starting from C and 3,in the short run an unexpected increase in money supply growth moves the economy to

Correct Answer
verified

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to the Economy in 2008.The effects of increased prices of world commodities is shown by shifting

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

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Correct Answer
verified

Other things the same,if there is an increase in the money supply growth rate that is larger than expected,then in the short run

Correct Answer
verified

Exam 35: The Short-Run Trade-Off Between Inflation and Unemployment

If there is a temporary adverse supply shock,then the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

A decrease in expected inflation shifts

Correct AnswerverifiedShow Answer

An adverse supply shock causes inflation to

Correct AnswerverifiedShow Answer

A favorable supply shock will cause the price level

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Correct AnswerverifiedShow 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

Which of the following is correct if there is an adverse supply shock?

Correct AnswerverifiedShow Answer

In the long run,an increase in the money supply growth rate

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps can be summarized in the following equation where a is positive number:

Correct AnswerverifiedShow Answer

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Correct AnswerverifiedShow Answer

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.The money supply growth rate is greatest at

Correct AnswerverifiedShow Answer

Proponents of rational expectations theory argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations,the sacrifice ratio could be as small as

Correct AnswerverifiedShow Answer

In the long run,if the Fed increases the rate at which it increases the money supply,

Correct AnswerverifiedShow Answer

As aggregate demand shifts right along the aggregate supply curve,

Correct AnswerverifiedShow Answer

Figure 35-5 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-5.Starting from C and 3,in the short run an unexpected increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to the Economy in 2008.The effects of increased prices of world commodities is shown by shifting

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

Sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied in

Correct AnswerverifiedShow Answer

Other things the same,if there is an increase in the money supply growth rate that is larger than expected,then in the short run

Correct AnswerverifiedShow Answer

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