Question 1

Ultimately,the short-run reduction in unemployment associated with an increase in inflation is due to

Accepted Answer

A)  the shape of the long-run aggregate supply curve.
B)  unanticipated inflation, not inflation per se.
C)  anticipated inflation, not inflation per se.
D)  a change in the natural rate of unemployment.E) A) and D)
F) B) and D)

Question 2

Short-run outcomes in the economy can be expressed in terms of output and the price level,or in terms of unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 3

Samuelson and Solow reasoned that when aggregate demand was low,unemployment was

Accepted Answer

A)  high, so there was upward pressure on wages and prices.
B)  high, so there was downward pressure on wages and prices.
C)  low, so there was upward pressure on wages and prices.
D)  low, so there was downward pressure on wages and prices.E) A) and C)
F) A) and D)

Question 4

Suppose that reducing inflation 3 percentage points would cost a country 4 percent of annual output.This country's sacrifice ratio is

Accepted Answer

A)  3/4.
B)  4/3.
C)  7.
D)  12.E) A) and B)
F) A) and C)

Question 5

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Accepted Answer

A) True 
 B)False

Question 6

Germany has a higher natural rate of unemployment than the United States.This suggests that

Accepted Answer

A)  Germany is at a higher point on its long-run Phillips curve and so has higher inflation than the United States.
B)  Germany is at a lower point on its long-run Phillips curve and so has lower inflation than the United States.
C)  Germany's Phillips curve is to the left of that of the United States, possibly because they have higher inflation.
D)  Germany's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.E) B) and D)
F) B) and C)

Question 7

Moving from the late 1960s to 1970-1973

Accepted Answer

A)  inflation remained high while the unemployment rate was lower than in the late 1960s.
B)  inflation remained high while the unemployment rate was higher than in the late 1960s.
C)  inflation remained low while the unemployment rate was lower than in the late 1960s.
D)  inflation remained low while the unemployment rate was higher than in the late 1960s.E) B) and C)
F) All of the above

Question 8

Use the pair of diagrams below to answer the following questions.
Figure 35-1
 
-Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,a decrease in the money supply moves the economy to

Accepted Answer

A)  e and 1.
B)  d and 2.
C)  d and 3.
D)  None of the above is correct.E) A) and B)
F) B) and C)

Question 9

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

Question 10

In the Friedman-Phelps analysis,when inflation is less than expected,unemployment is greater than the natural rate.

Accepted Answer

A) True 
 B)False

Question 11

Use the pair of diagrams below to answer the following questions.
Figure 35-1
 
-Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,a decrease in aggregate demand moves the economy to

Accepted Answer

A)  a and 2.
B)  d and 3.
C)  e and 3.
D)  None of the above is correct.E) B) and D)
F) All of the above

Question 12

In the short run,policy that changes aggregate demand changes

Accepted Answer

A)  both unemployment and the price level.
B)  neither unemployment nor the price level.
C)  only unemployment.
D)  only the price level.E) B) and D)
F) B) and C)

Question 13

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)  the unemployment rate will be below its natural rate whenever inflation is negative.
B)  the unemployment rate will be below its natural rate whenever inflation is positive.
C)  the unemployment rate will be below its natural rate only if inflation is less than expected.
D)  the unemployment rate will be below its natural rate only if inflation is greater than expected.E) A) and B)
F) B) and C)

Question 14

If the Fed announced a policy to reduce inflation and people found it credible,the short-run Phillips curve would shift

Accepted Answer

A)  right and the sacrifice ratio would fall.
B)  right and the sacrifice ratio would rise.
C)  left and the sacrifice ratio would fall.
D)  left and the sacrifice ratio would rise.E) B) and C)
F) A) and D)

Question 15

Which of the following is upward sloping?

Accepted Answer

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

Question 16

Which of the following is upward 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) A) and B)
F) A) and C)

Question 17

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops.The good weather would

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

Proponents of rational expectations argued that the sacrifice ratio

Accepted Answer

A)  could be high because it was rational for people not to immediately change their expectations.
B)  could be high because people might adjust their expectations quickly if they found anti-inflation policy credible.
C)  could be low because it was rational for people not to immediately change their expectations.
D)  could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.E) C) and D)
F) A) and B)

Question 20

In the long run,if the Fed increases the rate at which it increases the money supply,

Accepted Answer

A)  inflation will be higher.
B)  unemployment will be lower.
C)  real GDP will be higher.
D)  All of the above are correct.E) None of the above
F) C) and D)

Exam 35: The Short Run Trade Off Between Inflation and Unemployment

Samuelson and Solow reasoned that when aggregate demand was low,unemployment was

Correct AnswerverifiedShow Answer

Use the pair of diagrams below to answer the following questions. Figure 35-1 -Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,a decrease in the money supply moves the economy to

Correct AnswerverifiedShow Answer

In the long run,if the Fed increases the rate at which it increases the money supply,

Correct AnswerverifiedShow Answer

Suppose that reducing inflation 3 percentage points would cost a country 4 percent of annual output.This country's sacrifice ratio is

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Which of the following is upward sloping?

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Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops.The good weather would

Correct AnswerverifiedShow Answer

In the short run,policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

Ultimately,the short-run reduction in unemployment associated with an increase in inflation is due to

Correct AnswerverifiedShow Answer

Proponents of rational expectations argued that the sacrifice ratio

Correct AnswerverifiedShow Answer

Moving from the late 1960s to 1970-1973

Correct AnswerverifiedShow Answer

A favorable supply shock will cause the price level

Correct AnswerverifiedShow Answer

Germany has a higher natural rate of unemployment than the United States.This suggests that

Correct AnswerverifiedShow Answer

If the Fed announced a policy to reduce inflation and people found it credible,the short-run Phillips curve would shift

Correct AnswerverifiedShow Answer

Use the pair of diagrams below to answer the following questions. Figure 35-1 -Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,a decrease in aggregate demand moves the economy to

Correct AnswerverifiedShow Answer

In the Friedman-Phelps analysis,when inflation is less than expected,unemployment is greater than the natural rate.

Correct AnswerverifiedShow Answer

According to Friedman and Phelps's analysis of the Phillips curve,

Correct AnswerverifiedShow Answer

Short-run outcomes in the economy can be expressed in terms of output and the price level,or in terms of unemployment and inflation.

Correct AnswerverifiedShow Answer

Which of the following is upward sloping?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Correct AnswerverifiedShow Answer

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