Question 1

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Accepted Answer

A) True 
 B)False

Question 2

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Accepted Answer

A)  reduced inflation and unemployment.
B)  raised inflation and unemployment.
C)  reduce inflation and raised unemployment.
D)  raised inflation and reduced unemployment.E) A) and B)
F) All of the above

Question 3

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Accepted Answer

A)  only in the long run.
B)  only in the short run.
C)  in neither the long run nor short run.
D)  in both the short run and long run.E) None of the above
F) B) and C)

Question 4

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is

Accepted Answer

A)  5/2.
B)  3/2.
C)  2/3.
D)  2/5.E) C) and D)
F) B) and D)

Question 5

If policymakers increase 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) All of the above

Question 6

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Accepted Answer

In the short run, unemployment will rise...

Question 7

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Accepted Answer

A) True 
 B)False

Question 8

In the United States during the 1970s, expected inflation

Accepted Answer

A)  rose substantially.
B)  rose slightly.
C)  fell slightly.
D)  fell substantially.E) B) and C)
F) A) and D)

Question 9

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Accepted Answer

A)  If so, this might have been the result of a negative supply shock or an increase in expected inflation.
B)  If so, this might been the result of a negative supply shock, or a decrease in expected inflation.
C)  If so, this might have been the result of a positive supply shock, or an increase in expected inflation.
D)  If so, this might have been the result of a positive supply shock, or a decrease in expected inflation.E) None of the above
F) A) and D)

Question 10

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 11

According to Friedman and Phelps, the unemployment rate

Accepted Answer

A)  is never below its natural rate.
B)  is below its natural rate when actual inflation is greater than expected inflation.
C)  is below its natural rate when actual inflation is less than expected inflation.
D)  is below its natural rate when actual inflation equals expected inflation.E) A) and C)
F) B) and D)

Question 12

If people anticipate higher inflation, but inflation remains the same then

Accepted Answer

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

Question 13

A policy change that changes the natural rate of unemployment changes

Accepted Answer

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

Question 14

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Accepted Answer

In the long run the natural rate of unem...

Question 15

Which of the following is downward-sloping?

Accepted Answer

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

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Accepted Answer

A)  negative correlation between the rate of unemployment and the rate of inflation.
B)  positive correlation between the rate of unemployment and the rate of inflation.
C)  negative correlation between the rate of unemployment and the rate of interest.
D)  positive correlation between the rate of unemployment and the rate of interestE) All of the above
F) None of the above

Question 18

If the Federal Reserve increases the growth rate of the money supply, in the long run

Accepted Answer

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

Question 19

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve.   actual inflation rate  unemplayment rate 5%4%4%4.5%3%5%2%5.5%\begin{array} { | c | c | } \hline 	ext { actual inflation rate } & 	ext { unemplayment rate } \\hline 5 \% & 4 \% \\hline 4 \% & 4.5 \% \\hline 3 \% & 5 \% \\hline 2 \% & 5.5 \% \\hline\end{array} actual inflation rate 5%4%3%2%​ unemplayment rate 4%4.5%5%5.5%​​  Which of the following statements is correct?

Accepted Answer

A)  These points are consistent with the theoretical long-run Phillips curve, but not with the short-run Phillips curve.
B)  These points are consistent with the theoretical short-run Phillips curve, but not with the long-run Phillips curve.
C)  These points are consistent with both the theoretical short-run and long-run Phillips curves.
D)  These points are not consistent with either the theoretical short-run or long-run Phillips curves. E) B) and C)
F) All of the above

Question 20

In the long run, which of the following would shift the long-run Phillips curve to the right?

Accepted Answer

A)  an increase in the minimum wage
B)  an increase in government spending
C)  an increase in the money supply
D)  a decrease in the money supplyE) All of the above
F) A) and C)

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

Correct Answer
verified

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Correct Answer
verified

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

Correct Answer
verified

According to Friedman and Phelps, the unemployment rate

Correct Answer
verified

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

Correct Answer
verified

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Correct Answer
verified
In the long run the natural rate of unem...
View Answer

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is

Correct Answer
verified

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Correct Answer
verified

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct Answer
verified

If the Federal Reserve increases the growth rate of the money supply, in the long run

Correct Answer
verified

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Correct Answer
verified

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Correct Answer
verified

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct Answer
verified
In the short run, unemployment will rise...
View Answer

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Correct Answer
verified

Which of the following is downward-sloping?

Correct Answer
verified

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Correct Answer
verified

If people anticipate higher inflation, but inflation remains the same then

Correct Answer
verified

A policy change that changes the natural rate of unemployment changes

Correct Answer
verified

In the United States during the 1970s, expected inflation

Correct Answer
verified

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

If monetary policy moves unemployment below its natural rate, both expected and actual inflation will rise.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, the unemployment rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Correct AnswerverifiedIn the long run the natural rate of unem...View AnswerShow Answer

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year, the sacrifice ratio is

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Correct AnswerverifiedShow Answer

In the long run, which of the following would shift the long-run Phillips curve to the right?

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the growth rate of the money supply, in the long run

Correct AnswerverifiedShow Answer

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

Correct AnswerverifiedShow Answer

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Correct AnswerverifiedShow Answer

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct AnswerverifiedIn the short run, unemployment will rise...View AnswerShow Answer

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Correct AnswerverifiedShow Answer

Which of the following is downward-sloping?

Correct AnswerverifiedShow Answer

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Correct AnswerverifiedShow Answer

If people anticipate higher inflation, but inflation remains the same then

Correct AnswerverifiedShow Answer

A policy change that changes the natural rate of unemployment changes

Correct AnswerverifiedShow Answer

In the United States during the 1970s, expected inflation

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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Correct Answer
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In the long run the natural rate of unem...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In the short run, unemployment will rise...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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