Question 1

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Accepted Answer

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

Question 2

In the late 1960s, economist Edmund Phelps published a paper that

Accepted Answer

A)  argued that there was no long-run tradeoff between inflation and unemployment.
B)  disproved Friedman's claim that monetary policy was effective in controlling inflation.
C)  showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation rate of 2 percent.
D)  argued that the Phillips curve was stable and that it would not shift.E) A) and B)
F) B) and C)

Question 3

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Accepted Answer

A)  and the inflation rate rise.
B)  and the inflation rate fall.
C)  rises and the inflation rate falls.
D)  falls and the inflation rate rises.E) A) and C)
F) A) and B)

Question 4

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Accepted Answer

They are consistent with the long-run Ph...

Question 5

If people correctly anticipate that inflation will fall by 1%, then

Accepted Answer

A)  the short-run Phillips curve shifts right and unemployment is unchanged.
B)  the short-run Phillips curve shifts right and unemployment rises.
C)  the short-run Phillips curve shifts left and unemployment is unchanged.
D)  the short-run Phillips curve would shift left and unemployment falls.E) A) and B)
F) B) and C)

Question 6

In the long run, an increase 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) B) and D)
F) None of the above

Question 7

The short-run Phillips curve intersects the long-run Phillips curve where

Accepted Answer

A)  the actual rate of inflation equals the expected rate of inflation.
B)  the actual rate of unemployment equals the natural rate of unemployment.
C)  Both A and B are correct.
D)  None of the above is correct.E) All of the above
F) A) and C)

Question 8

Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS)  curve and two aggregate-demand (AD)  curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 35-3. What is measured along the vertical axis of the right-hand graph?

Accepted Answer

A)  the interest rate
B)  the inflation rate
C)  the government's budget deficit as a percent of GDP
D)  the growth rate of the nominal money supplyE) None of the above
F) B) and C)

Question 9

According to the Phillips curve, unemployment and inflation are negatively related in

Accepted Answer

A)  the short run and in the long run.
B)  the short run, but not in the long run.
C)  the long run, but not in the short run.
D)  neither the long run nor the short run.E) A) and C)
F) B) and C)

Question 10

A favorable supply shock will cause the price level

Accepted Answer

A)  and output to rise.
B)  and output to fall.
C)  to rise and output to fall.
D)  to fall and output to rise.E) A) and B)
F) B) and D)

Question 11

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 B)
F) All of the above

Question 12

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but that it actually leaves inflation at 25%. Suppose that the public had expected that the Department of Finance would reduce inflation, but only to 20%. Then

Accepted Answer

A)  unemployment falls, but it would have fallen more if people had been expecting 12.5% inflation.
B)  unemployment falls, but it would have fallen more if people had been expecting 22% inflation.
C)  unemployment rises, but it would have risen more if people had been expecting 12.5% inflation.
D)  unemployment rises, but it would have risen more if people had been expecting 22% inflation.E) None of the above
F) All of the above

Question 13

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

Accepted Answer

A)  Inflation expectations rise which shifts the short-run Phillips curve to the right.
B)  Inflation expectations rise which shifts the short-run Phillips curve to the left.
C)  Inflation expectations fall which shifts the short-run Phillips curve to the right.
D)  Inflation expectations fall which shifts the short-run Phillips curve to the left.E) All of the above
F) C) and D)

Question 14

Refer to Monetary Policy in Mokania. The Bank of Mokania reduced inflation to its announced goal of 5%. However the unemployment rate was on average higher for many years after. A newspaper editorial argues that the unemployment rate had moved to this higher natural rate because (1)  by itself the decrease in inflation had permanently increased unemployment and (2)  that at the same time the central bank was fighting inflation the government of Mokania had made a large increase in the minimum wage. Which of these arguments is consistent with the Phillip's curve model?

Accepted Answer

A)  both explanations 1 and 2
B)  neither explanation 1 nor 2
C)  explanation 1 but not explanation 2
D)  explanation 2 but not explanation 1E) A) and B)
F) None of the above

Question 15

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Accepted Answer

The econom...

Question 16

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Accepted Answer

A)  have higher average inflation rates than the United States.
B)  have long-run Phillips curves to the right of the United States'.
C)  may have less generous unemployment compensation or lower minimum wages.
D)  All of the above are consistent with the evidence on unemployment rates.E) A) and B)
F) A) and C)

Question 17

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)

Question 18

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 19

Figure 35-9. 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." 1 to PC2, the curve will soon shift back to PC1 if people perceive the A) increase in the inflation rate as a temporary aberration. B) economic boom as a temporary aberration. C) increase in the inflation rate as a sign of a new era of higher inflation. D) economic boom as a sign of a new era of higher economic growth." class="answers-bank-image d-inline" rel="preload" > 1 to PC2, the curve will soon shift back to PC1 if people perceive the A) increase in the inflation rate as a temporary aberration. B) economic boom as a temporary aberration. C) increase in the inflation rate as a sign of a new era of higher inflation. D) economic boom as a sign of a new era of higher economic growth." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 35-9. Subsequent to the shift of the Phillips curve from PC1 to PC2, the curve will soon shift back to PC1 if people perceive the

Accepted Answer

A)  increase in the inflation rate as a temporary aberration.
B)  economic boom as a temporary aberration.
C)  increase in the inflation rate as a sign of a new era of higher inflation.
D)  economic boom as a sign of a new era of higher economic growth.E) All of the above
F) B) and D)

Question 20

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

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

The short-run Phillips curve intersects the long-run Phillips curve where

Correct Answer
verified

A.W. Phillips found a

Correct Answer
verified

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Correct Answer
verified
The econom...
View Answer

In the late 1960s, economist Edmund Phelps published a paper that

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

According to the Phillips curve, unemployment and inflation are negatively related in

Correct Answer
verified

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Correct Answer
verified

In the long run, an increase in the money supply growth rate

Correct Answer
verified

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Correct Answer
verified

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct Answer
verified

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

A favorable supply shock will cause the price level

Correct Answer
verified

If people correctly anticipate that inflation will fall by 1%, then

Correct Answer
verified

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Correct Answer
verified
They are consistent with the long-run Ph...
View Answer

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

The short-run Phillips curve intersects the long-run Phillips curve where

Correct AnswerverifiedShow Answer

A.W. Phillips found a

Correct AnswerverifiedShow Answer

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 4%.

Correct AnswerverifiedThe econom...View AnswerShow Answer

In the late 1960s, economist Edmund Phelps published a paper that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the Phillips curve, unemployment and inflation are negatively related in

Correct AnswerverifiedShow Answer

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Correct AnswerverifiedShow Answer

In the long run, an increase in the money supply growth rate

Correct AnswerverifiedShow Answer

If more firms chose to pay efficiency wages, which of the following would shift to the right?

Correct AnswerverifiedShow Answer

For a number of years Canada and many European countries have had higher average unemployment rates than the United States. The Phillips curve suggests that these countries

Correct AnswerverifiedShow Answer

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A favorable supply shock will cause the price level

Correct AnswerverifiedShow Answer

If people correctly anticipate that inflation will fall by 1%, then

Correct AnswerverifiedShow Answer

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Correct AnswerverifiedThey are consistent with the long-run Ph...View AnswerShow Answer

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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verified
The econom...
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They are consistent with the long-run Ph...
View Answer

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