Question 1

If inflation expectations rise,the short-run Phillips curve shifts

Accepted Answer

A)   right,so that at any unemployment rate inflation is higher in the short run than before.
B)   left,so that at any unemployment rate inflation is higher in the short run the before.
C)   right,so that at any unemployment rate inflation is lower in the short run than before.
D)   left,so that at any unemployment rate inflation is lower in the short run than before.E) A) and B)
F) A) and C)

Question 2

According to the long-run Phillips curve,in the long run monetary policy influences

Accepted Answer

A)   both the inflation rate and the unemployment rate.
B)   the inflation rate but not the unemployment rate.
C)   the unemployment rate but not the inflation rate.
D)   neither the unemployment rate nor the inflation rate.E) B) and C)
F) A) and D)

Question 3

Refer to Monetary Policy in Southland.Suppose the Southland 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) A) and D)
F) B) and C)

Question 4

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Accepted Answer

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

Question 5

Which of the following is correct concerning the long-run Phillips curve?

Accepted Answer

A)   Its position is determined primarily by monetary factors.
B)   If it shifts right,long-run aggregate supply shifts right.
C)   It cannot be changed by any government policy.
D)   Its position depends on the natural rate of unemployment.E) A) and C)
F) A) and B)

Question 6

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.E) A) and B)
F) A) and C)

Question 7

Germany has a higher natural rate of unemployment than the United States.This suggests that

Accepted Answer

A)   Germany is at a higher point on its long-run Phillips curve and so has higher inflation than the United States.
B)   Germany is at a lower point on its long-run Phillips curve and so has lower inflation than the United States.
C)   Germany's Phillips curve is to the left of that of the United States,possibly because they have higher inflation.
D)   Germany's Phillips curve is to the right of that of the United States,possibly because they have more generous unemployment compensation.E) A) and B)
F) A) and C)

Question 8

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Accepted Answer

A)   the inflation rate decreases.
B)   the government increases its expenditures.
C)   the Fed decreases the money supply.
D)   None of the above is correct.E) None of the above
F) C) and D)

Question 9

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

Accepted Answer

A)   rises.As inflation expectations adjust,the short-run Phillips curve shifts right.
B)   rises.As inflation expectations adjust,the short-run Phillips curve shifts left.
C)   falls.As inflation expectations adjust,the short-run Phillips curve shifts right.
D)   falls.As inflation expectations adjust,the short-run Phillips curve shifts left.E) B) and C)
F) A) and B)

Question 10

Suppose that the money supply increases.In the short run this decreases unemployment according to

Accepted Answer

A)   both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B)   neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C)   the short-run Phillips curve,but not the aggregate demand and supply model.
D)   the aggregate demand and aggregate supply model,but not the short-run Phillips curve.E) A) and C)
F) B) and D)

Question 11

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) C) and D)

Question 12

An adverse supply shock will cause output

Accepted Answer

A)   and prices to rise.
B)   and prices to fall.
C)   to rise and prices to fall.
D)   to fall and prices to rise.E) A) and C)
F) None of the above

Question 13

Which of the following explains the time-inconsistency of policy explained by Kydland and Prescott?

Accepted Answer

A)   A contractionary monetary policy will lead to higher unemployment in the short-run but not the long-run.
B)   An expansionary monetary policy will lead to higher unemployment in the short-run but not the long-run.
C)   Expected inflation is higher than otherwise if the public believes that policymakers will be tempted to raise inflation to reduce unemployment.
D)   Expected inflation is lower than otherwise if the public believes that policymakers will be tempted to lower inflation to reduce unemployment.E) A) and B)
F) None of the above

Question 14

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher in

Accepted Answer

A)   the long run and the short run.
B)   the long run but not the short run.
C)   the short run but not the long run.
D)   neither the short run nor the long run.E) A) and C)
F) None of the above

Question 15

Figure 35-4
Use the graph below to answer the following questions. 
-Refer to Figure 35-4.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) None of the above

Question 16

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 decrease 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) C) and D)
F) B) and D)

Question 17

Friedman argued that the Fed could use monetary policy to peg

Accepted Answer

A)   nominal exchange rates.
B)   the level of real GDP.
C)   the rate of unemployment.
D)   None of the above is correct.E) A) and D)
F) C) and D)

Question 18

Figure 35-4
Use the graph below to answer the following questions. 
-Refer to Figure 35-4.If the economy starts at C and the money supply growth rate increases,in the long run the economy

Accepted Answer

A)   stays at C.
B)   moves to B.
C)   moves to F.
D)   None of the above is consistent wit an increase in the money supply growth rate.E) None of the above
F) A) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The natural rate of unemployment

Accepted Answer

A)   is constant over time.
B)   varies over time,but can't be changed by the government.
C)   is the unemployment rate that the economy tends to move to in the long run.
D)   depends on the rate at which the Fed increases the money supply.E) A) and B)
F) All of the above

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

Which of the following explains the time-inconsistency of policy explained by Kydland and Prescott?

Correct Answer
verified

Friedman argued that the Fed could use monetary policy to peg

Correct Answer
verified

Which of the following is correct concerning the long-run Phillips curve?

Correct Answer
verified

There is a

Correct Answer
verified

According to the long-run Phillips curve,in the long run monetary policy influences

Correct Answer
verified

If inflation expectations rise,the short-run Phillips curve shifts

Correct Answer
verified

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

Correct Answer
verified

An adverse supply shock will cause output

Correct Answer
verified

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher in

Correct Answer
verified

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Correct Answer
verified

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

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 decrease in money supply growth moves the economy to

Correct Answer
verified

Suppose that the money supply increases.In the short run this decreases unemployment according to

Correct Answer
verified

The natural rate of unemployment

Correct Answer
verified

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.If the economy starts at C and the money supply growth rate increases,in the long run the economy

Correct Answer
verified

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct Answer
verified

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

Correct Answer
verified

Correct Answer
verified

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.Curve 1 is the

Correct Answer
verified

Germany has a higher natural rate of unemployment than the United States.This suggests that

Correct Answer
verified

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

Which of the following explains the time-inconsistency of policy explained by Kydland and Prescott?

Correct AnswerverifiedShow Answer

Friedman argued that the Fed could use monetary policy to peg

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the long-run Phillips curve?

Correct AnswerverifiedShow Answer

There is a

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve,in the long run monetary policy influences

Correct AnswerverifiedShow Answer

If inflation expectations rise,the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An adverse supply shock will cause output

Correct AnswerverifiedShow Answer

If the Federal Reserve decreases the rate at which it increases the money supply,then unemployment is higher in

Correct AnswerverifiedShow Answer

The economy will move to a point on the short-run Phillips curve where unemployment is lower if

Correct AnswerverifiedShow Answer

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

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 decrease in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

Suppose that the money supply increases.In the short run this decreases unemployment according to

Correct AnswerverifiedShow Answer

The natural rate of unemployment

Correct AnswerverifiedShow Answer

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.If the economy starts at C and the money supply growth rate increases,in the long run the economy

Correct AnswerverifiedShow Answer

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct AnswerverifiedShow Answer

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says,then in the short run unemployment

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 35-4 Use the graph below to answer the following questions. -Refer to Figure 35-4.Curve 1 is the

Correct AnswerverifiedShow Answer

Germany has a higher natural rate of unemployment than the United States.This suggests that

Correct AnswerverifiedShow Answer

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