Question 1

Any policy change that reduced the natural rate of unemployment

Accepted Answer

A)   would shift the long-run Phillips curve to the right.
B)   would shift the long-run aggregate-supply curve to the right.
C)   would be a policy change that impeded the functioning of the labor market.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 2

If a central bank wants to counter the change in the price level caused by an adverse supply shock, it could change the money supply to shift

Accepted Answer

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

Question 3

Which of the following increases inflation and reduces unemployment in the short run?

Accepted Answer

A)   either an increase in government expenditures by itself or an increase in the money supply growth rate by itself
B)   an increase in government expenditures, but not an increase in the money supply growth rate
C)   an increase in the money supply growth rate, but not an increase in government expenditures
D)   neither an increase in government expenditures nor an increase in the money supplyE) A) and B)
F) B) and C)

Question 4

An event that directly affects firms' costs of production and thus the prices they charge is called

Accepted Answer

A)   a Phillips contraction.
B)   an inflationary spiral.
C)   a demand shock.
D)   a supply shock.E) All of the above
F) A) and D)

Question 5

The misery index is calculated as the

Accepted Answer

A)   inflation rate plus the unemployment rate.
B)   unemployment rate minus the inflation rate.
C)   actual inflation rate minus the expected inflation rate.
D)   natural unemployment rate times the inflation rateE) A) and B)
F) None of the above

Question 6

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

A)   should not see an increase in the unemployment rate even in the short run.
B)   will having rising unemployment for a while, but then return to the natural rate of unemployment.
C)   will have a permanently higher unemployment rate.
D)   None of the above is suggested by the arguments of Friedman and Phelps.E) A) and B)
F) A) and D)

Question 7

If there is an increase in the price of oil, then

Accepted Answer

A)   unemployment rises. If the central bank tries to counter this increase, inflation rises.
B)   unemployment rises. If the central bank tries to counter this increase, inflation falls.
C)   unemployment falls. If the central bank tries to counter this decrease, inflation falls.
D)   unemployment falls. If the central bank tries to counter this decrease, inflation rises.E) A) and B)
F) B) and C)

Question 8

By about 1973, U.S. policymakers had learned that

Accepted Answer

A)   Friedman and Phelps's analysis of inflation and unemployment had been correct.
B)   the short-run Phillips curve shifts when expectations of inflation change.
C)   there is no long-run trade-off between inflation and unemployment.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 9

If policymakers decrease aggregate demand, then in the short run the price level

Accepted Answer

A)   falls and unemployment rises.
B)   and unemployment fall.
C)   and unemployment rise.
D)   rises and unemployment falls.E) A) and B)
F) A) and C)

Question 10

Refer to The Economy in 2008. The effects of the housing and financial crises could be 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) B) and C)
F) A) and D)

Question 11

Unemployment would decrease and prices would increase if

Accepted Answer

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

Question 12

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

Question 13

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 14

Samuelson and Solow argued that a combination of low unemployment and low inflation

Accepted Answer

A)   was impossible given the historical data as summarized by the Phillips curve.
B)   could be achieved with an "appropriate" fiscal policy.
C)   could be achieved with an "appropriate" monetary policy.
D)   could be achieved with an "appropriate" mix of monetary and fiscal policies.E) All of the above
F) A) and B)

Question 15

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. The money supply growth rate is greatest at

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   F.E) A) and B)
F) None of the above

Question 16

Disinflation would eventually cause

Accepted Answer

A)   the short-run and the long run Phillips curve to shift right.
B)   the short-run and the long run Phillips curve to shift left.
C)   the short-run Phillips curve but not the long run Phillips curve to shift right.
D)   the short-run Phillips curve but not the long run Phillips curve to shift left.E) A) and D)
F) A) and C)

Question 17

Suppose that the money supply decreases. In the short run, this increases prices 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 according to the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.E) B) and C)
F) B) and D)

Question 18

Which of the following is downward-sloping?

Accepted Answer

A)   both the long-run Phillips curve and the short-run Phillips curve
B)   neither the long-run Phillips curve nor the short-run Phillips curve
C)   the long-run Phillips curve, but not the short-run Phillips curve
D)   the short-run Phillips curve, but not the long-run Phillips curveE) B) and C)
F) A) and D)

Question 19

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

Question 20

Refer to The Economy in 2008. In the short-run the effects of the housing and financial crises

Accepted Answer

A)   raise both inflation and the unemployment rate.
B)   raise the inflation rate and reduce the unemployment rate.
C)   reduce the inflation rate and raise the unemployment rate.
D)   reduce both the inflation rate and the unemployment rate.E) A) and B)
F) A) and C)

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

The arguments of Friedman and Phelps would suggest that other things the same, a country that pursues a disinflationary policy that the public does not find completely credible

Correct AnswerverifiedShow Answer

Samuelson and Solow argued that a combination of low unemployment and low inflation

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

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Friedman argued that the Fed could use monetary policy to peg

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Disinflation would eventually cause

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If policymakers decrease aggregate demand, then in the short run the price level

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Refer to The Economy in 2008. In the short-run the effects of the housing and financial crises

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Unemployment would decrease and prices would increase if

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If there is an increase in the price of oil, then

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By about 1973, U.S. policymakers had learned that

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Any policy change that reduced the natural rate of unemployment

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The misery index is calculated as the

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Which of the following is downward-sloping?

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Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. The money supply growth rate is greatest at

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A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

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An event that directly affects firms' costs of production and thus the prices they charge is called

Correct AnswerverifiedShow Answer

An adverse supply shock causes inflation to

Correct AnswerverifiedShow Answer

Which of the following increases inflation and reduces unemployment in the short run?

Correct AnswerverifiedShow Answer

If a central bank wants to counter the change in the price level caused by an adverse supply shock, it could change the money supply to shift

Correct AnswerverifiedShow Answer

Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Correct AnswerverifiedShow Answer

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