Question 1

An adverse supply shock will shift short-run aggregate supply

Accepted Answer

A)   right, making prices rise.
B)   left, making prices rise.
C)   right, making prices fall.
D)   left, making prices fall.E) All of the above
F) C) and D)

Question 2

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 socially desirable rate of unemployment.
D)   does not depend on the rate at which the Fed increases the money supply.E) A) and B)
F) A) and C)

Question 3

Some economists argue suddenly reducing money supply growth is a costly way to reduce inflation and that it may not work. For example, if a government cuts money growth but makes no real fiscal reforms, people will expect the government will eventually need to expand the money supply to pay for its expenditures. Thus, the promise to fight inflation will not be credible. Explain why credibility is important to a reduction in the inflation rate.

Accepted Answer

If people believe that the government re...

Question 4

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

Accepted Answer

A)   increases inflation and shifts the short-run Phillips curve right.
B)   increases inflation and shifts the short-run Phillips curve left.
C)   decreases inflation and shifts the short-run Philips curve right.
D)   decreases inflation and shifts the short-run Phillips curve left.E) A) and D)
F) None of the above

Question 5

How does a central bank's accommodation of an adverse supply shock change the long­run results of the shock?

Accepted Answer

If a central bank accommodates an advers...

Question 6

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

Accepted Answer

A)   the economy moves down along the short-run Phillips curve.
B)   the economy moves up along the short-run Phillips curve.
C)   the Phillips curve shifts right.
D)   the Phillips curve shifts left.E) None of the above
F) B) and C)

Question 7

In 1980, the U.S. misery index was

Accepted Answer

A)   much higher than average.
B)   slightly higher than average.
C)   about average.
D)   below average.E) C) and D)
F) A) and B)

Question 8

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Accepted Answer

A) True 
 B)False

Question 9

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Accepted Answer

The price level and output ris...

Question 10

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Accepted Answer

The Phillips curve shows the relation be...

Question 11

If the Federal Reserve accommodates an adverse supply shock,

Accepted Answer

A)   inflation expectations may rise which shifts the short-run Phillips curve shifts right.
B)   inflation expectations may rise which shifts the short-run Phillips curve shifts left.
C)   inflation expectations may fall which shifts the short-run Phillips curve shifts right.
D)   inflation expectations may fall which shifts the short-run Phillips curve shifts leftE) All of the above
F) None of the above

Question 12

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

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) A) and B)

Question 15

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Accepted Answer

A)   both higher inflation and higher unemployment in the long run.
B)   higher inflation and no change in unemployment in the long run.
C)   the same inflation rate and lower unemployment in the long run.
D)   higher inflation and lower unemployment in the long runE) B) and C)
F) B) and D)

Question 16

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) All of the above
F) C) and D)

Question 17

A.W. Phillips found a

Accepted Answer

A)   positive relation between unemployment and inflation in the United Kingdom.
B)   positive relation between unemployment and inflation in the United States.
C)   negative relation between unemployment and inflation in the United States.
D)   negative relation between unemployment and inflation in the United Kingdom.E) A) and C)
F) A) and B)

Question 18

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Accepted Answer

A)   The change in inflation, but not the change in unemployment is consistent with what a given short-run Phillips curve implies.
B)   The change in unemployment, but not the change in inflation is consistent with what a given short-run Phillips curve implies.
C)   Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.
D)   Neither the change in inflation nor the change in unemployment are consistent with what a given short-run Phillips curve implies.E) B) and C)
F) All of the above

Question 19

One determinant of the natural rate of unemployment is the

Accepted Answer

A)   rate of growth of the money supply.
B)   minimum wage rate.
C)   expected inflation rate.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 20

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Accepted Answer

It returns...

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

If the Federal Reserve accommodates an adverse supply shock,

Correct Answer
verified

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Correct Answer
verified
It returns...
View Answer

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Correct Answer
verified
The price level and output ris...
View Answer

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Correct Answer
verified
The Phillips curve shows the relation be...
View Answer

The natural rate of unemployment

Correct Answer
verified

A.W. Phillips found a

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

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

Correct Answer
verified

An increase in expected inflation shifts the

Correct Answer
verified

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct Answer
verified

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Correct Answer
verified

How does a central bank's accommodation of an adverse supply shock change the longrun results of the shock?

Correct Answer
verified
If a central bank accommodates an advers...
View Answer

One determinant of the natural rate of unemployment is the

Correct Answer
verified

Correct Answer
verified
If people believe that the government re...
View Answer

In 1980, the U.S. misery index was

Correct Answer
verified

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct Answer
verified

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Correct Answer
verified

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

Correct Answer
verified

An adverse supply shock will shift short-run aggregate supply

Correct Answer
verified

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

Correct Answer
verified

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

If the Federal Reserve accommodates an adverse supply shock,

Correct AnswerverifiedShow Answer

According to the Phillips curve diagram, if a central bank disinflates what ultimately happens to the unemployment rate?

Correct AnswerverifiedIt returns...View AnswerShow Answer

Government expenditures increase. What happens to the price level and output? Explain how the change in the price level and output effect the inflation rate and the unemployment rate.

Correct AnswerverifiedThe price level and output ris...View AnswerShow Answer

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Correct AnswerverifiedThe Phillips curve shows the relation be...View AnswerShow Answer

The natural rate of unemployment

Correct AnswerverifiedShow Answer

A.W. Phillips found a

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

For a given level of inflation expectations, if the central bank increases the money supply growth rate, then in the short run

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts the

Correct AnswerverifiedShow Answer

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to

Correct AnswerverifiedShow Answer

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.

Correct AnswerverifiedShow Answer

How does a central bank's accommodation of an adverse supply shock change the long­run results of the shock?

Correct AnswerverifiedIf a central bank accommodates an advers...View AnswerShow Answer

One determinant of the natural rate of unemployment is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf people believe that the government re...View AnswerShow Answer

In 1980, the U.S. misery index was

Correct AnswerverifiedShow Answer

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Correct AnswerverifiedShow Answer

Other things the same, an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An adverse supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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It returns...
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Correct Answer
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The price level and output ris...
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Correct Answer
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The Phillips curve shows the relation be...
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

How does a central bank's accommodation of an adverse supply shock change the longrun results of the shock?

Correct Answer
verified
If a central bank accommodates an advers...
View Answer

Correct Answer
verified

Correct Answer
verified
If people believe that the government re...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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