Question 1

An adverse supply shock causes output to

Accepted Answer

A)  rise. To counter this a central bank would increase the money supply.
B)  rise. To counter this a central bank would decrease the money supply.
C)  fall. To counter this a central bank would increase the money supply.
D)  fall. To counter this a central bank would decrease the money supply.E) B) and D)
F) None of the above

Question 2

Figure 22-1. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, U represents the unemployment rate. 
-Refer to Figure 22-1. Assuming the price level in the previous year was 100, point F on the right-hand graph corresponds to

Accepted Answer

A)  point A on the left-hand graph.
B)  point B on the left-hand graph.
C)  point C on the left-hand graph.
D)  point D on the left-hand graph.E) A) and D)
F) A) and C)

Question 3

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Accepted Answer

A)  raised inflation and unemployment.
B)  raised inflation and reduced unemployment.
C)  reduced inflation and raised unemployment.
D)  reduced inflation and unemployment.E) A) and B)
F) A) and C)

Question 4

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 5

In the early 1970s, the short-run Phillips curve shifted

Accepted Answer

A)  right as inflation expectations rose.
B)  right as inflation expectations fell.
C)  left as inflation expectations rose.
D)  left as inflation expectations fell.E) B) and C)
F) C) and D)

Question 6

The monetary-policy framework called inflation targeting is used explicitly by

Accepted Answer

A)  no major country.
B)  most major countries except the United States and Japan.
C)  the United States, but it is not used by other major countries.
D)  most major countries, including the United States and Japan.E) None of the above
F) A) and C)

Question 7

Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." 
-Refer to Figure 22-8. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as

Accepted Answer

A)  the outcome of a favorable supply shock.
B)  falling inflation.
C)  stagflation.
D)  All of the above are correct.E) B) and C)
F) C) and D)

Question 8

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Accepted Answer

Consider what happens when the aggregate...

Question 9

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 D)
F) B) and C)

Question 10

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Accepted Answer

A)  reduced inflation and unemployment.
B)  raised inflation and unemployment.
C)  reduced inflation and raised unemployment.
D)  raised inflation and reduced unemployment.E) None of the above
F) C) and D)

Question 11

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Accepted Answer

A)  lowers both inflation and unemployment.
B)  lowers inflation but raises unemployment.
C)  raises inflation but lowers unemployment.
D)  raises both inflation and unemployment.E) All of the above
F) A) and C)

Question 12

Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Southland. Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that it will soon change monetary policy to reduce inflation to 12.5%. If Southlanders believe their government then which, if any, curve(s)  shift left?

Accepted Answer

A)  the short-run and the long-run Phillips curve
B)  the short-run but not the long run Phillips curve
C)  the long-run but not the short-run Phillips curve
D)  neither the short-run nor the long-run Phillips curveE) None of the above
F) A) and C)

Question 13

Samuelson and Solow argued that when unemployment is high, there is

Accepted Answer

A)  upward pressures on wages and prices.
B)  upward pressures on wages and downward pressures on prices.
C)  upward pressures on prices and downward pressures on wages.
D)  downward pressures on wages and prices.E) A) and C)
F) A) and D)

Question 14

The misery index is supposed to measure the

Accepted Answer

A)  social cost of unemployment.
B)  health of the economy.
C)  lost output associated with a particular unemployment rate.
D)  short-run tradeoff between inflation and unemployment.E) A) and D)
F) All of the above

Question 15

Country A's long-run Phillips curve is farther to the right than country B's. Country A and country B are identical in all other ways. In particular, they have the same money supply growth rates. In the long run as compared to country B country A will have

Accepted Answer

A)  higher unemployment and higher inflation.
B)  higher unemployment and the same rate of inflation.
C)  lower unemployment and higher inflation.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 16

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Accepted Answer

A) True 
 B)False

Question 17

From 1993-2001 the U.S. economy experienced

Accepted Answer

A)  relatively low inflation and unemployment rates.
B)  relatively high inflation and unemployment rates.
C)  relatively low inflation rates and relatively high unemployment rates.
D)  relatively high inflation rates and relatively low unemployment rates.E) A) and B)
F) All of the above

Question 18

One determinant of the long-run average unemployment rate is the

Accepted Answer

A)  market power of unions, while the inflation rate depends primarily upon government spending.
B)  minimum wage, while the inflation rate depends primarily upon the money supply growth rate.
C)  rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions.
D)  existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive.E) B) and C)
F) C) and D)

Question 19

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

Accepted Answer

A)  shifts both the long-run and the short-run Phillips curves right.
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 20

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to the Economy in 2008. The effects of increased prices of world commodities is 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) A) and C)
F) B) and D)

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

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

Correct Answer
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Correct Answer
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The misery index is supposed to measure the

Correct Answer
verified

Correct Answer
verified

In the early 1970s, the short-run Phillips curve shifted

Correct Answer
verified

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Correct Answer
verified

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

Correct Answer
verified

Friedman argued that the Fed could use monetary policy to peg

Correct Answer
verified

Country A's long-run Phillips curve is farther to the right than country B's. Country A and country B are identical in all other ways. In particular, they have the same money supply growth rates. In the long run as compared to country B country A will have

Correct Answer
verified

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Correct Answer
verified

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Correct Answer
verified

Correct Answer
verified

The monetary-policy framework called inflation targeting is used explicitly by

Correct Answer
verified

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Correct Answer
verified
Consider what happens when the aggregate...
View Answer

From 1993-2001 the U.S. economy experienced

Correct Answer
verified

An adverse supply shock causes output to

Correct Answer
verified

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct Answer
verified

Samuelson and Solow argued that when unemployment is high, there is

Correct Answer
verified

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Correct Answer
verified

One determinant of the long-run average unemployment rate is the

Correct Answer
verified

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

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The misery index is supposed to measure the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the early 1970s, the short-run Phillips curve shifted

Correct AnswerverifiedShow Answer

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Friedman argued that the Fed could use monetary policy to peg

Correct AnswerverifiedShow Answer

Country A's long-run Phillips curve is farther to the right than country B's. Country A and country B are identical in all other ways. In particular, they have the same money supply growth rates. In the long run as compared to country B country A will have

Correct AnswerverifiedShow Answer

During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending. According to the Phillips curve, in the short run these policies should have

Correct AnswerverifiedShow Answer

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The monetary-policy framework called inflation targeting is used explicitly by

Correct AnswerverifiedShow Answer

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Correct AnswerverifiedConsider what happens when the aggregate...View AnswerShow Answer

From 1993-2001 the U.S. economy experienced

Correct AnswerverifiedShow Answer

An adverse supply shock causes output to

Correct AnswerverifiedShow Answer

In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.

Correct AnswerverifiedShow Answer

Samuelson and Solow argued that when unemployment is high, there is

Correct AnswerverifiedShow Answer

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

Correct AnswerverifiedShow Answer

One determinant of the long-run average unemployment rate is the

Correct AnswerverifiedShow Answer

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Consider what happens when the aggregate...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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