Question 1

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 2

Suppose Americans become pessimistic about the future of the economy and, as a result, reduce their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

Accepted Answer

A)  In the short run, unemployment will increase and inflation will fall.
B)  In the short run, unemployment will increase and inflation will rise.
C)  In the short run, unemployment will decrease and inflation will rise.
D)  In the short run, unemployment will decrease and inflation will fall.E) B) and C)
F) None of the above

Question 3

A policy that lowered the natural rate of unemployment would shift

Accepted Answer

A)  both the short-run and the long-run Phillips curves to the left.
B)  the short-run Phillips curve left but leave the long-run Phillips curve unchanged.
C)  the long-run Phillips curve left but leave the short-run Phillips curve unchanged.
D)  neither the long-run Phillips curve nor the short-run Phillips curve left.E) A) and D)
F) All of the above

Question 4

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

Accepted Answer

The answer of A central bank raises the money supply...

Question 5

If policymakers expand aggregate demand, then in the long run

Accepted Answer

A)  prices will be higher and unemployment will be lower.
B)  prices will be higher and unemployment will be unchanged.
C)  prices and unemployment will be unchanged.
D)  prices will be lower and unemployment will be higher.E) C) and D)
F) All of the above

Question 6

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Accepted Answer

The unempl...

Question 7

Unexpectedly high inflation reduces unemployment in the short run, but as inflation expectations adjust the unemployment rate returns to its natural rate.

Accepted Answer

A) True 
 B)False

Question 8

Figure 35-3  ​
​
-Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Accepted Answer

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

Question 9

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Accepted Answer

A)  rises.As inflation expectations adjust, the short-run Phillips curve shifts right.
B)  rises.As inflation expectations adjust, the short-run Phillips curve shifts left.
C)  falls.As inflation expectations adjust, the short-run Phillips curve shifts right.
D)  falls.As inflation expectations adjust, the short-run Phillips curve shifts left.E) A) and C)
F) B) and C)

Question 10

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 11

If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run

Accepted Answer

A)  both the unemployment rate and the inflation rate would be lower.
B)  the unemployment rate would be lower and the inflation rate would be higher.
C)  the unemployment rate would be higher and the inflation rate would be lower.
D)  the unemployment rate and the inflation rate would be higher.E) A) and B)
F) None of the above

Question 12

All else equal, country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's. In the long run as compared to country B, country A will have

Accepted Answer

A)  lower unemployment and higher inflation.
B)  higher unemployment and higher inflation.
C)  lower unemployment and lower inflation.
D)  higher unemployment and lower inflation.E) C) and D)
F) B) and D)

Question 13

Figure 35-5 1 to AS2? A) A reduction in firms' costs of production B) A reduction in taxes on consumers C) An increase in the price level D) An increase in the world price of oil" class="answers-bank-image d-inline" rel="preload" > 1 to AS2? A) A reduction in firms' costs of production B) A reduction in taxes on consumers C) An increase in the price level D) An increase in the world price of oil" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 35-5. Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

Accepted Answer

A)  A reduction in firms' costs of production
B)  A reduction in taxes on consumers
C)  An increase in the price level
D)  An increase in the world price of oilE) All of the above
F) A) and B)

Question 14

A favorable supply shock will cause

Accepted Answer

A)  unemployment to rise and the short-run Phillips curve to shift right.
B)  unemployment to rise and the short-run Phillips curve to shift left.
C)  unemployment to fall and the short-run Phillips curve to shift right.
D)  unemployment to fall and the short-run Phillips curve to shift left.E) A) and C)
F) B) and D)

Question 15

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Accepted Answer

A)  Bureau of the Budget.
B)  Bureau of Labor Statistics.
C)  Department of the Treasury.
D)  President's Council of Economic Advisors.E) All of the above
F) B) and C)

Question 16

Scenario 35-1
Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to Scenario 35-1. In the short run the housing and financial crises

Accepted Answer

A)  raised both the price level and output.
B)  raised the price level and reduced output.
C)  reduced the price level and raised output.
D)  reduced both the price level and output.E) B) and D)
F) A) and C)

Question 17

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

Accepted Answer

A)  The economy will move up and to the left along the short-run Phillips Curve.
B)  The economy will move down and to the right along the short-run Phillips Curve.
C)  ​The short-run Phillips Curve will shift to the left.
D)  ​The short-run Phillips Curve will shift to the right.E) A) and D)
F) B) and D)

Question 18

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Accepted Answer

The inflation rate r...

Question 19

If the central bank increases the money supply, in the short run, output

Accepted Answer

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

Question 20

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate toward its previous level it would

Accepted Answer

A)  increase the rate at which the money supply increases.This will also move inflation closer to its previous rate.
B)  increase the rate at which the money supply increases.However, this will make inflation higher than its previous rate.
C)  decrease the rate at which the money supply increases.This will also move inflation closer to its original rate.
D)  decrease the rate at which the money supply increases.However, this will make higher than its previous rate.E) A) and C)
F) A) and B)

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

A central bank raises the money supply growth rate and keeps it higher. As the economy moves from the short-run equilibrium created by the increase in the money supply growth back to long-run equilibrium what happens to the unemployment rate?

Correct AnswerverifiedShow Answer

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Correct AnswerverifiedThe unempl...View AnswerShow Answer

Figure 35-5 -Refer to Figure 35-5. Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

Correct AnswerverifiedShow Answer

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Correct AnswerverifiedShow Answer

If the central bank increases the money supply, in the short run, output

Correct AnswerverifiedShow Answer

If policymakers expand aggregate demand, then in the long run

Correct AnswerverifiedShow Answer

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Correct AnswerverifiedShow Answer

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

Correct AnswerverifiedShow Answer

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct AnswerverifiedShow Answer

Scenario 35-1 Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to Scenario 35-1. In the short run the housing and financial crises

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?

Correct AnswerverifiedThe inflation rate r...View AnswerShow Answer

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate toward its previous level it would

Correct AnswerverifiedShow Answer

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Correct AnswerverifiedShow Answer

All else equal, country A has a higher money supply growth rate and a long-run Phillips curve that is farther to the left than country B's. In the long run as compared to country B, country A will have

Correct AnswerverifiedShow Answer

Suppose Americans become pessimistic about the future of the economy and, as a result, reduce their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

Correct AnswerverifiedShow Answer

Figure 35-3 ​ ​ -Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Correct AnswerverifiedShow Answer

A favorable supply shock will cause

Correct AnswerverifiedShow Answer

A policy that lowered the natural rate of unemployment would shift

Correct AnswerverifiedShow Answer

Unexpectedly high inflation reduces unemployment in the short run, but as inflation expectations adjust the unemployment rate returns to its natural rate.

Correct AnswerverifiedShow Answer

If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run

Correct AnswerverifiedShow Answer

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Figure 35-5 -Refer to Figure 35-5. Which of the following events could explain the shift of the aggregate-supply curve from AS₁ to AS₂?

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The inflation rate r...
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Figure 35-3 -Refer to Figure 35-3. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

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