Question 1

If macroeconomic policy expands aggregate demand,unemployment will fall and inflation will rise in the short run.

Accepted Answer

A) True 
 B)False  True

Question 2

In the long run,

Accepted Answer

A)  the natural rate of unemployment depends primarily on the level of aggregate demand.
B)  inflation depends primarily upon the money supply growth rate.
C)  there is a tradeoff between the inflation rate and the natural rate of unemployment.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 3

Use the graph below to answer the following questions.
Figure 35-2
 
-Refer to Figure 35-2.Curve 1 is the

Accepted Answer

A)  long-run aggregate supply curve.
B)  short-run aggregate supply curve.
C)  long-run Phillips curve.
D)  short-run Phillips curve.E) All of the above
F) A) and D)

Question 4

An increase in expected inflation shifts the

Accepted Answer

A)  short-run Phillips curve right.
B)  short-run Phillips curve left.
C)  long-run Phillips curve right.
D)  long-run Phillips curve left.E) All of the above
F) A) and C)

Question 5

Considering a plot of the inflation rate and the unemployment rate,one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000s than it was in the last part of the 1990s and 2000.

Accepted Answer

A)  If so, this might be the result of a negative supply shock or an increase in expected inflation.
B)  Is so, this might be the result of a negative supply shock, or a decrease in expected inflation.
C)  If so, this might have been the result of a positive supply shock, or an increase in expected inflation.
D)  If so, this might have been the result of a positive supply shock, or a decrease in expected inflation.E) C) and D)
F) None of the above

Question 6

Monetary Policy in Hyperion
In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Hyperion.Suppose the Hyperion Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level.Suppose at first that the public thought inflation would only drop to 18%,but eventually become convinced that the inflation rate will stay at 12.5%.

Accepted Answer

A)  unemployment rises in the short run, and remains higher than it's original value in the long run.
B)  unemployment rises in the short run, and is the same as it's original value in the long run.
C)  unemployment falls in the short run, and is lower than it's original value in the long run.
D)  unemployment falls in the short run, and is the same as it's original value in the long run.E) None of the above
F) All of the above

Question 7

The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 8

Friedman and Phelps believed that the natural rate of unemployment was constant.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A)  the short-run Phillips curve shifts left
B)  unemployment falls
C)  the price level rises
D)  output rises.E) B) and D)
F) A) and B)

Question 10

Which of the following would tend to shorten recessions associated with anti-inflation policies of the Federal Reserve?

Accepted Answer

A)  People adjust their expectations of inflation slowly.
B)  People believe policy announcements made by Fed officials.
C)  The short-run Phillips curve does not shift immediately.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 11

The position of the long-run Phillips curve depends on

Accepted Answer

A)  the inflation rate and the natural rate of unemployment.
B)  the inflation rate but not the natural rate of unemployment.
C)  the natural rate of unemployment, but not the inflation rate.
D)  neither the natural rate of unemployment nor the inflation rate.E) None of the above
F) B) and C)

Question 12

In 1979 the Chair of the Federal Reserve was

Accepted Answer

A)  Alan Greenspan.
B)  Roger Ferguson.
C)  Ben Bernanke
D)  Paul Volcker.E) B) and D)
F) A) and B) D

Question 13

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

Accepted Answer

A)  a and 1.
B)  back to c and 3.
C)  d and 4.
D)  e and 5.E) None of the above
F) A) and B)

Question 14

a In the nineteenth century,some countries were on a gold standard so that on average the money supply growth rate was close to zero and expected inflation was more or less constant.For these countries during this time period,we find that increases in actual inflation were generally associated with falling unemployment.These findings

Accepted Answer

A)  are consistent with Friedman and Phelps' theories, because they argued that when inflation was higher than expected, unemployment would fall.
B)  are consistent with Friedman and Phelps' theories, because they argued that when prices rose unemployment would fall whether actual inflation was higher than expected or not.
C)  are inconsistent with Friedman and Phelps' theories, because they argued that higher inflation would increase unemployment.
D)  are inconsistent with Friedman and Phelps' theories, because they argued that inflation and unemployment are unrelated.E) B) and C)
F) A) and C)

Question 15

Friedman and Phelps argued

Accepted Answer

A)  that in the long run, monetary growth did not influence those factors that determine the economy's unemployment rate.
B)  that the Phillips curve could be exploited in the long run by using monetary, but not fiscal policy.
C)  that the short-run Phillips curve was very steep, but not vertical.
D)  that there was neither a short-run nor long-run tradeoff between inflation and unemployment.E) A) and D)
F) B) and C)

Question 16

In the late 1960s,economist Edmund Phelps published a paper that

Accepted Answer

A)  argued that there was no long-run tradeoff between inflation and unemployment.
B)  disproved Friedman's claim that monetary policy was ineffective in controlling inflation.
C)  showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent.
D)  argued that the Phillips curve was stable and that it would not shift.E) A) and C)
F) A) and D)

Question 17

The government of Libertina considers two policies.Policy A would shift AD right by 200 units while policy B would shift AD right by 100 units.According to the short-run Phillips curve policy A will lead

Accepted Answer

A)  to a lower unemployment rate and a lower inflation rate than policy B.
B)  to a lower unemployment rate and a higher inflation rate than policy B.
C)  to a higher unemployment rate and lower inflation rate than policy B.
D)  to a higher unemployment rate and higher inflation rate than policy B.E) B) and C)
F) None of the above

Question 18

Which of the following is correct if there is a favorable 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) A) and B)
F) A) and C)

Question 19

Use the graph below to answer the following questions.
Figure 35-2
 
-Refer to Figure 35-2.If the economy starts at c and the money supply growth rate decreases,in the short run the economy

Accepted Answer

A)  moves to b.
B)  stays at c.
C)  moves to e.
D)  None of the above is correct.E) B) and D)
F) A) and C)

Question 20

In the long run,which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage
B)  a decrease in tax rates
C)  an increase in the money supply
D)  a decrease in the money supplyE) B) and C)
F) A) and B) A

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

If macroeconomic policy expands aggregate demand,unemployment will fall and inflation will rise in the short run.

Correct Answer
verified
True

In the long run,

Correct Answer
verified

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.Curve 1 is the

Correct Answer
verified

An increase in expected inflation shifts the

Correct Answer
verified

Considering a plot of the inflation rate and the unemployment rate,one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000s than it was in the last part of the 1990s and 2000.

Correct Answer
verified

Correct Answer
verified

The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

Correct Answer
verified

Friedman and Phelps believed that the natural rate of unemployment was constant.

Correct Answer
verified

Which of the following would not be associated with a favorable supply shock?

Correct Answer
verified

Which of the following would tend to shorten recessions associated with anti-inflation policies of the Federal Reserve?

Correct Answer
verified

The position of the long-run Phillips curve depends on

Correct Answer
verified

In 1979 the Chair of the Federal Reserve was

Correct Answer
verified
D

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

Correct Answer
verified

Correct Answer
verified

Friedman and Phelps argued

Correct Answer
verified

In the late 1960s,economist Edmund Phelps published a paper that

Correct Answer
verified

The government of Libertina considers two policies.Policy A would shift AD right by 200 units while policy B would shift AD right by 100 units.According to the short-run Phillips curve policy A will lead

Correct Answer
verified

Which of the following is correct if there is a favorable supply shock?

Correct Answer
verified

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.If the economy starts at c and the money supply growth rate decreases,in the short run the economy

Correct Answer
verified

In the long run,which of the following would shift the long-run Phillips curve to the right?

Correct Answer
verified
A

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

If macroeconomic policy expands aggregate demand,unemployment will fall and inflation will rise in the short run.

Correct AnswerverifiedTrue

In the long run,

Correct AnswerverifiedShow Answer

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.Curve 1 is the

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts the

Correct AnswerverifiedShow Answer

Considering a plot of the inflation rate and the unemployment rate,one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000s than it was in the last part of the 1990s and 2000.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

Correct AnswerverifiedShow Answer

Friedman and Phelps believed that the natural rate of unemployment was constant.

Correct AnswerverifiedShow Answer

Which of the following would not be associated with a favorable supply shock?

Correct AnswerverifiedShow Answer

Which of the following would tend to shorten recessions associated with anti-inflation policies of the Federal Reserve?

Correct AnswerverifiedShow Answer

The position of the long-run Phillips curve depends on

Correct AnswerverifiedShow Answer

In 1979 the Chair of the Federal Reserve was

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Friedman and Phelps argued

Correct AnswerverifiedShow Answer

In the late 1960s,economist Edmund Phelps published a paper that

Correct AnswerverifiedShow Answer

The government of Libertina considers two policies.Policy A would shift AD right by 200 units while policy B would shift AD right by 100 units.According to the short-run Phillips curve policy A will lead

Correct AnswerverifiedShow Answer

Which of the following is correct if there is a favorable supply shock?

Correct AnswerverifiedShow Answer

Use the graph below to answer the following questions. Figure 35-2 -Refer to Figure 35-2.If the economy starts at c and the money supply growth rate decreases,in the short run the economy

Correct AnswerverifiedShow Answer

In the long run,which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedA

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D

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A