Question 1

In most of the 1970s, the Fed's policy created expectations of high inflation.

Accepted Answer

A) True 
 B)False

Question 2

Figure 17-8. 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."
 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 17-8. 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) B) and C)
F) A) and C)

Question 3

Which of the following describes the Volcker disinflation most accurately?

Accepted Answer

A)   Almost all of the public believed that the Fed would keep money growth low, so unemployment rose less than it would have otherwise.
B)   Almost all of the public believed that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.
C)   Much of the public did not believe that the Fed would keep money growth low, so unemployment rose less than it would have otherwise.
D)   Much of the public did not believe that the Fed would keep money growth low, so unemployment rose more than it would have otherwise.E) All of the above
F) None of the above

Question 4

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) A) and B)
F) All of the above

Question 5

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

Question 6

When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that

Accepted Answer

A)   if they contract aggregate demand, the unemployment rate will increase further.
B)   if they expand aggregate demand, the inflation rate will increase further.
C)   they face a less favorable trade-off between inflation and unemployment than they did before the shock.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 7

Figure 17-5
Use the graph below to answer the following questions.
 
-Refer to Figure 17-5. Curve 1 is the

Accepted Answer

A)   long-run aggregate supply curve.
B)   short-run aggregate supply curve.
C)   long-run Phillips curve.
D)   short-run Phillips curve.E) None of the above
F) B) and C)

Question 8

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

Question 9

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Accepted Answer

A)   unemployment will be higher
B)   unemployment will be lower
C)   inflation will be higher
D)   inflation will be lowerE) B) and D)
F) B) and C)

Question 10

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Accepted Answer

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

Question 11

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

Question 12

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Accepted Answer

A) True 
 B)False

Question 13

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Accepted Answer

A)   the short-run and long-run Phillips curves left.
B)   the short-run and long-run Phillips curves right.
C)   only the short-run Phillips curve left.
D)   only the short-run Phillips curve right.E) A) and B)
F) B) and C)

Question 14

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 15

In the 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

Accepted Answer

A)   the recession that followed smaller and so provided a more favorable tradeoff between inflation and unemployment.
B)   the recession that followed smaller, but in doing so produced a less favorable tradeoff between inflation and unemployment.
C)   the recession that followed larger, but in doing so provided a more favorable tradeoff between inflation and unemployment.
D)   the recession that followed larger and also produced a less favorable tradeoff between inflation and unemployment.E) C) and D)
F) A) and B)

Question 16

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Accepted Answer

A)   both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)   inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)   inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)   inflation is lower and unemployment is the same as it was prior to the change in policy.E) C) and D)
F) B) and C)

Question 17

If the short-run Phillips curve were stable, which of the following would be unusual?

Accepted Answer

A)   an increase in government spending and a fall in unemployment
B)   an increase in inflation and a decrease in output
C)   a decrease in the inflation rate and a rise in the unemployment rate
D)   a decrease in the money supply and a rise in the unemployment rate.E) B) and C)
F) C) and D)

Question 18

A favorable supply shock

Accepted Answer

A)   raises unemployment and the inflation rate.
B)   raises unemployment and reduces the inflation rate.
C)   reduces unemployment and raises the inflation rate.
D)   reduces unemployment and the inflation rate.E) B) and C)
F) B) and D)

Question 19

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is correct if there is an adverse supply shock?

Accepted Answer

A)   The short-run aggregate supply curve and the short-run Phillips curve both shift right.
B)   The short-run aggregate supply curve and the short-run Phillips curve both shift left.
C)   The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
D)   The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.E) None of the above
F) C) and D)

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that

Correct Answer
verified

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

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 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

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

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Correct Answer
verified

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

Correct Answer
verified

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Correct Answer
verified

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Correct Answer
verified

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Correct Answer
verified

In most of the 1970s, the Fed's policy created expectations of high inflation.

Correct Answer
verified

A favorable supply shock

Correct Answer
verified

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct Answer
verified

Which of the following is correct if there is an adverse supply shock?

Correct Answer
verified

If the short-run Phillips curve were stable, which of the following would be unusual?

Correct Answer
verified

Which of the following describes the Volcker disinflation most accurately?

Correct Answer
verified

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

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

Figure 17-5 Use the graph below to answer the following questions. -Refer to Figure 17-5. Curve 1 is the

Correct Answer
verified

Correct Answer
verified

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that

Correct AnswerverifiedShow Answer

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

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 1970's the Federal Reserve responded to an adverse supply shock. Its policy made

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

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Correct AnswerverifiedShow Answer

There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?

Correct AnswerverifiedShow Answer

The long-run response to an increase in the growth rate of the money supply is shown by shifting

Correct AnswerverifiedShow Answer

In most of the 1970s, the Fed's policy created expectations of high inflation.

Correct AnswerverifiedShow Answer

A favorable supply shock

Correct AnswerverifiedShow Answer

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

Correct AnswerverifiedShow Answer

Which of the following is correct if there is an adverse supply shock?

Correct AnswerverifiedShow Answer

If the short-run Phillips curve were stable, which of the following would be unusual?

Correct AnswerverifiedShow Answer

Which of the following describes the Volcker disinflation most accurately?

Correct AnswerverifiedShow Answer

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

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

Figure 17-5 Use the graph below to answer the following questions. -Refer to Figure 17-5. Curve 1 is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified