Question 1

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

Accepted Answer

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

Question 2

Figure 35-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate.  
-Refer to Figure 35-1.Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012,and those two points correspond to points B and C,respectively,on the left-hand graph.Also suppose we know that the price index equaled 120 in 2011.Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Accepted Answer

A)   155 and 175,respectively.
B)   138 and 156,respectively.
C)   137.5 and 154.75,respectively.
D)   135 and 150,respectively.E) B) and D)
F) C) and D)

Question 3

The theory by which people optimally use all available information when forecasting the future is known as

Accepted Answer

A)   rational expectations.
B)   perfect expectations.
C)   credible expectations.
D)   predictive expectations.E) None of the above
F) All of the above

Question 4

For a number of years Canada and many European countries have had higher average unemployment rates than the United States.The Phillips 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) None of the above
F) B) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The long-run Phillips curve would shift left if

Accepted Answer

A)   the money supply increased or if the minimum wage was reduced.
B)   the money supply increased but not if the minimum wage was reduced.
C)   the minimum wage was reduced but not if the money supply increased.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 7

In 1968,economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Accepted Answer

A)   it seemed to work for wages but not for inflation.
B)   monetary policy was ineffective in combating inflation.
C)   the Phillips curve did not apply in the long run.
D)   Phillips had made errors in collecting his data.E) All of the above
F) C) and D) C

Question 8

Figure
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy.
-Refer to The Economy in 2008.The short-run effects of rising world commodity are shown by

Accepted Answer

A)   moving to the right along the short-run Phillips curve.
B)   moving to the left along the short-run Phillips curve.
C)   shifting the short-run Phillips curve right.
D)   shifting the short-run Phillips curve left.E) A) and B)
F) B) and C)

Question 9

Suppose the central bank pursues an unexpectedly expansionary monetary policy.In the short-run the effects of this are shown by

Accepted Answer

A)   moving to the left along the short-run Phillips curve.
B)   moving to the right along the short-run Phillips curve.
C)   shifting the short run Phillips curve right.
D)   shifting the short run Phillips curve left.E) A) and D)
F) A) and C) A

Question 10

A policy that raised the natural rate of unemployment would shift

Accepted Answer

A)   both the short-run and the long-run Phillips curves to the right.
B)   the short-run Phillips curve right but leave the long-run Phillips curve unchanged.
C)   the long-run Phillips curve right but leave the short-run Phillips curve unchanged.
D)   neither the long-run Phillips curve nor the short-run Phillips curve right.E) None of the above
F) All of the above

Question 11

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Accepted Answer

A)   It would shift the long-run Phillips curve right.
B)   It would shift the long-run Phillips curve left.
C)   There would be an upward movement along a given long-run Phillips curve.
D)   There would be a downward movement along a given long-run Philips curve.E) None of the above
F) A) and C)

Question 12

Unemployment would decrease and prices increase if

Accepted Answer

A)   aggregate demand shifted right.
B)   aggregate demand shifted left.
C)   aggregate supply shifted right.
D)   aggregate supply shifted left.E) B) and C)
F) A) and C)

Question 13

If a central bank increases the money supply in response to an adverse supply shock,which of the following does its action move back closer to its value before the shock?

Accepted Answer

A)   both the price level and output
B)   the price level but not output
C)   output but not the price level
D)   neither output nor the price levelE) C) and D)
F) None of the above

Question 14

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Accepted Answer

A) True 
 B)False

Question 15

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government then which,if any,curve(s) shift left?

Accepted Answer

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

Question 16

A movement to the right along a given short-run Phillips curve could be caused by

Accepted Answer

A)   an increase in the natural rate of unemployment or expansionary monetary policy.
B)   expansionary monetary policy,but not an increase in the natural rate of unemployment.
C)   an increase in the natural rate of unemployment or a contractionary monetary policy.
D)   contractionary monetary policy,but not an increase in the natural rate of unemployment.E) C) and D)
F) B) and D)

Question 17

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

Question 18

Figure 35-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in taxes moves the economy to

Accepted Answer

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

Question 19

A change in expected inflation shifts

Accepted Answer

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

Question 20

Figure 35-3  Refer to figure 35-3.In this order,which curve is a long-run Phillips curve and which is a short-run Phillips curve?
a.
A,B
b.
A,D
c.
C,B
d.
None of the above is correct.
ANS: B DIF: 1 REF: 35-2 NAT: Analytic
LOC: Unemployment and inflation TOP: Short-run Phillips curve | Long-run Phillips curve
MSC: Definitional
-Which of the following is vertical?

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 long-run Phillips curve,but not the long-run aggregate supply curve.E) All of the above
F) A) and B)

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

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

Correct Answer
verified
A

Correct Answer
verified

The theory by which people optimally use all available information when forecasting the future is known as

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 suggests that these countries

Correct Answer
verified

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

Correct Answer
verified

The long-run Phillips curve would shift left if

Correct Answer
verified

In 1968,economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct Answer
verified
C

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of rising world commodity are shown by

Correct Answer
verified

Suppose the central bank pursues an unexpectedly expansionary monetary policy.In the short-run the effects of this are shown by

Correct Answer
verified
A

A policy that raised the natural rate of unemployment would shift

Correct Answer
verified

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct Answer
verified

Unemployment would decrease and prices increase if

Correct Answer
verified

If a central bank increases the money supply in response to an adverse supply shock,which of the following does its action move back closer to its value before the shock?

Correct Answer
verified

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Correct Answer
verified

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government then which,if any,curve(s) shift left?

Correct Answer
verified

A movement to the right along a given short-run Phillips curve could be caused by

Correct Answer
verified

In the short run,policy that changes aggregate demand changes

Correct Answer
verified

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in taxes moves the economy to

Correct Answer
verified

A change in expected inflation shifts

Correct Answer
verified

Correct Answer
verified

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

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

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

The theory by which people optimally use all available information when forecasting the future is known as

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 suggests that these countries

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The long-run Phillips curve would shift left if

Correct AnswerverifiedShow Answer

In 1968,economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that

Correct AnswerverifiedC

Figure The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were impacting the economy. -Refer to The Economy in 2008.The short-run effects of rising world commodity are shown by

Correct AnswerverifiedShow Answer

Suppose the central bank pursues an unexpectedly expansionary monetary policy.In the short-run the effects of this are shown by

Correct AnswerverifiedA

A policy that raised the natural rate of unemployment would shift

Correct AnswerverifiedShow Answer

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

Correct AnswerverifiedShow Answer

Unemployment would decrease and prices increase if

Correct AnswerverifiedShow Answer

If a central bank increases the money supply in response to an adverse supply shock,which of the following does its action move back closer to its value before the shock?

Correct AnswerverifiedShow Answer

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Correct AnswerverifiedShow Answer

Refer to Monetary Policy in Southland.Suppose that the Southland Department of Finance undertakes a public relations campaign to convince people that they will soon change monetary policy to reduce inflation to 12.5%.If Southlanders believe their government then which,if any,curve(s) shift left?

Correct AnswerverifiedShow Answer

A movement to the right along a given short-run Phillips curve could be caused by

Correct AnswerverifiedShow Answer

In the short run,policy that changes aggregate demand changes

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,an increase in taxes moves the economy to

Correct AnswerverifiedShow Answer

A change in expected inflation shifts

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
A

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C

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A

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