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What did Friedman and Phelps argue about the relationship between inflation and unemployment?


A) The inflation rate is related to unemployment in the long-run.
B) The inflation rate is unrelated to unemployment in the long-run. .
C) The inflation rate is related to unemployment in the short-run.
D) The inflation rate is unrelated to unemployment in the short-run.

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

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If there is a favourable supply shock,which of the following will most likely happen?


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

E) A) and C)
F) None of the above

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What happened to expected inflation in Canada during the 1970s?


A) It rose substantially.
B) It rose slightly.
C) It fell slightly.
D) It fell substantially.

E) A) and C)
F) A) and B)

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What do the data for the period of 1968 through 1973 demonstrate?


A) that there is a short-run tradeoff between inflation and unemployment
B) that a supply shock can disrupt the short-run tradeoff between inflation and unemployment
C) that there is a long-run tradeoff between inflation and unemployment
D) that a demand shock can disrupt the short-run tradeoff between inflation and unemployment

E) A) and B)
F) B) and C)

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If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 6 percent would require sacrificing what percent of annual output?


A) 2 percent of annual output
B) 5 percent of annual output
C) 6 percent of annual output
D) 12 percent of annual output

E) A) and B)
F) A) and C)

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How will an adverse supply shock shift the short-run Phillips curve,and how does inflation change?


A) It will shift the short-run Phillips curve right, and inflation will rise.
B) It will shift the short-run Phillips curve right, and inflation will fall.
C) It will shift the short-run Phillips curve left, and inflation will rise.
D) It will shift the short-run Phillips curve left, and inflation will fall.

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

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How does the short-run Phillips curve model reflect an increase in the expected inflation?


A) as a downward shift in the short-run Phillips curve
B) as an upward shift in the short-run Phillips curve
C) as a downward movement along the short-run Phillips curve
D) as an upward movement along the short-run Phillips curve

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

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In the late 1960s and early 1970s,how did the short-run Phillips curve shift?


A) It shifted right as inflation expectations rose.
B) It shifted right as inflation expectations fell.
C) It shifted left as inflation expectations rose.
D) It shifted left as inflation expectations fell.

E) A) and B)
F) All of the above

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Figure 16-4 Figure 16-4 -Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short run? A) point a B) point b C) point c D) point d -Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short run?


A) point a
B) point b
C) point c
D) point d

E) A) and C)
F) None of the above

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Figure 16-3 Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,where does a decrease in aggregate demand move the economy to,in the short run and the long run? A) a and 1 in the short run, b and 2 in the long run B) b and 2 in the short run, a and 1 in the long run C) d and 4 in the short run, e and 5 in the long run D) b and 4 in the short run, e and 1 in the long run -Refer to the Figure 16-3.Starting from c and 3,where does a decrease in aggregate demand move the economy to,in the short run and the long run?


A) a and 1 in the short run, b and 2 in the long run
B) b and 2 in the short run, a and 1 in the long run
C) d and 4 in the short run, e and 5 in the long run
D) b and 4 in the short run, e and 1 in the long run

E) B) and D)
F) A) and B)

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According to Samuelson and Solow,when aggregate demand is low,how are unemployment,wages,and prices affected?


A) Unemployment is high, so there is upward pressure on wages and prices.
B) Unemployment is high, so there is downward pressure on wages and prices.
C) Unemployment is low, so there is upward pressure on wages and prices.
D) Unemployment is low, so there is downward pressure on wages and prices.

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

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

A) True
B) False

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What did Samuelson and Solow believe about the Phillips curve?


A) It implied that low unemployment was associated with low inflation.
B) It indicated that the aggregate supply and aggregate demand model was incorrect.
C) It offered policymakers a menu of possible economic outcomes from which to choose.
D) It demonstrated that fiscal policies were ineffective in reducing unemployment.

E) A) and D)
F) B) and D)

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

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The Phillips curve shows the relation be...

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Suppose a central bank reduced inflation by 4 percentage points and that made output fall by 6 percentage points for three years,and it made the unemployment rate rise from 3 percent to 9 percent for three years.What is the sacrifice ratio?


A) 1
B) 3
C) 4
D) 4.5

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

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Suppose an economy with high inflation decides to decrease the money supply growth rate.Which of the following best describes the results?


A) Initially unemployment rises. Eventually the short-run Phillips curve shifts right.
B) Initially unemployment rises. Eventually the short-run Phillips curve shifts left.
C) Initially unemployment falls. Eventually the short-run Phillips curve shifts right.
D) Initially unemployment falls. Eventually the short-run Phillips curve shifts left.

E) C) and D)
F) B) and D)

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Figure 16-2 Figure 16-2 -Refer to the Figure 16-2.If the economy starts at c and the money supply growth rate increases,where does the economy move to in the long run? A) b B) d C) e D) a -Refer to the Figure 16-2.If the economy starts at c and the money supply growth rate increases,where does the economy move to in the long run?


A) b
B) d
C) e
D) a

E) A) and B)
F) A) and C)

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A vertical long-run Phillips curve is consistent with which of the following?


A) the principle of monetary neutrality
B) real world data
C) a natural rate of unemployment that depends on the inflation rate
D) a downward-sloping aggregate-demand curve

E) All of the above
F) None of the above

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Suppose the natural rate of unemployment is 4 percent.Then suppose that Parliament passes laws that make the labour market less flexible,so the natural rate of unemployment rises to 5 percent.If the sacrifice ratio is 3,how much is the inflation rate that is consistent with the increased natural level of unemployment,such that there is no loss in output growth?


A) 2 percent
B) 4 percent
C) 6 percent
D) 8 percent

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

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Discuss the advantages and disadvantages of drawing the AD-AS model in terms of inflation (p)and rate of growth (g).

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The AD-AS model in terms of p and g is m...

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