Question 1

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

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

Question 4

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

Accepted Answer

A) True 
 B)False

Question 5

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Accepted Answer

The Phillips curve shows the relation be...

Question 6

Figure 17-7
Use this graph to answer the questions below.
 
-Refer to figure 17-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Accepted Answer

A)   3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
B)   3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.
C)   7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
D)   7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.E) B) and D)
F) All of the above

Question 7

If inflation expectations decline, then the short-run Phillips curve shifts

Accepted Answer

A)   left, so that at any inflation rate unemployment is lower in the short run than before.
B)   right, so that at any inflation rate unemployment is lower in the short run than before.
C)   right, so that at any inflation rate unemployment is higher in the short run than before.
D)   left, so that at any inflation rate unemployment is higher in the short run than before.E) A) and C)
F) A) and D)

Question 8

Country A's long-run Phillips curve is farther to the right than country B's. Country A and country B are identical in all other ways. In particular, they have the same money supply growth rates. In the long run as compared to country B country A will have

Accepted Answer

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

Question 9

A decrease in government expenditures serves as an example of an adverse supply shock.

Accepted Answer

A) True 
 B)False

Question 10

In 1980, the combination of inflation and unemployment the U.S. was experiencing

Accepted Answer

A)   resulted from a leftward shift of the short-run Phillips curve.
B)   was consistent with feasible inflation-unemployment combinations provided by the Phillips curve of the 1960s.
C)   followed two supply shocks that were triggered by the Organization of Petroleum Exporting Countries.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 11

Figure 17-2
Use the pair of diagrams below to answer the following questions.
 
-Refer to Figure 17-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

Accepted Answer

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

Question 12

Figure 17-6
Use the two graphs in the diagram to answer the following questions.
 
-Refer to Figure 17-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Accepted Answer

A)   A and 1.
B)   B and 2.
C)   back to C and 3.
D)   D and 4.E) None of the above
F) All of the above

Question 13

Which of the following shifts the long-run Phillips curve left?

Accepted Answer

A)   both an increase in the inflation rate and a decrease in the minimum wage rate
B)   an increase in the inflation rate, but not a decrease in the minimum wage rate
C)   a decrease in the minimum wage rate, but not an increase in the inflation rate
D)   neither a decrease in the minimum wage rate nor an increase in the inflation rateE) A) and D)
F) None of the above

Question 14

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

Accepted Answer

A)   unemployment equals the natural rate and expected inflation equals actual inflation.
B)   unemployment is above the natural rate and expected inflation equals actual inflation.
C)   unemployment equals the natural rate and expected inflation is greater than actual inflation.
D)   None of the above is necessarily correct.E) A) and B)
F) All of the above

Question 15

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 PC2, policymakers will A)  ask whether the shift is temporary or permanent. B)  be concerned with how people adjust their expectations of inflation as a result of the shift. C)  face, as well, a decision as to whether to accommodate the shock. D)  All of the above are correct. " class="answers-bank-image d-inline" rel="preload" > 1 to PC2, policymakers will A)  ask whether the shift is temporary or permanent. B)  be concerned with how people adjust their expectations of inflation as a result of the shift. C)  face, as well, a decision as to whether to accommodate the shock. D)  All of the above are correct. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-8. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Accepted Answer

A)   ask whether the shift is temporary or permanent.
B)   be concerned with how people adjust their expectations of inflation as a result of the shift.
C)   face, as well, a decision as to whether to accommodate the shock.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 16

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."
  
-Refer to Figure 17-8. What is measured along the horizontal axis of the right-hand graph?

Accepted Answer

A)   time
B)   the unemployment rate
C)   real GDP
D)   the growth rate of real GDPE) A) and D)
F) C) and D)

Question 17

In the long run, a decrease in the money supply growth rate

Accepted Answer

A)   shifts both the long-run and the short-run Phillips curves right.
B)   shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)   shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)   None of the above is correct.E) None of the above
F) C) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

Accepted Answer

A)   Inflation expectations rise which shifts the short-run Phillips curve to the right.
B)   Inflation expectations rise which shifts the short-run Phillips curve to the left.
C)   Inflation expectations fall which shifts the short-run Phillips curve to the right.
D)   Inflation expectations fall which shifts the short-run Phillips curve to the left.E) A) and B)
F) All of the above

Question 20

Phillips found a

Accepted Answer

A)   positive relation between unemployment and inflation in the United Kingdom.
B)   positive relation between unemployment and inflation in the United States.
C)   negative relation between unemployment and inflation in the United States.
D)   negative relation between unemployment and inflation in the United Kingdom.E) A) and B)
F) B) and C)

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

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

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If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

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Figure 17-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 17-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

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Which of the following shifts the long-run Phillips curve left?

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In the long run, a decrease in the money supply growth rate

Correct AnswerverifiedShow Answer

In 1980, the combination of inflation and unemployment the U.S. was experiencing

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Figure 17-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 17-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

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If inflation expectations decline, then the short-run Phillips curve shifts

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

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Phillips found a

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Country A's long-run Phillips curve is farther to the right than country B's. Country A and country B are identical in all other ways. In particular, they have the same money supply growth rates. In the long run as compared to country B country A will have

Correct AnswerverifiedShow Answer

The Phillips curve and the short-run aggregate supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.

Correct AnswerverifiedThe Phillips curve shows the relation be...View AnswerShow Answer

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

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A decrease in government expenditures serves as an example of an adverse supply shock.

Correct AnswerverifiedShow Answer

Figure 17-7 Use this graph to answer the questions below. -Refer to figure 17-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

Correct AnswerverifiedShow Answer

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

Correct AnswerverifiedShow Answer

An adverse supply shock shifts the short-run Phillips curve right. If people raise their inflation expectations, the short-run Phillips curve shifts farther right.

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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." -Refer to Figure 17-8. Faced with the shift of the Phillips curve from PC1 to PC2, policymakers will

Correct AnswerverifiedShow Answer

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." -Refer to Figure 17-8. What is measured along the horizontal axis of the right-hand graph?

Correct AnswerverifiedShow Answer

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The Phillips curve shows the relation be...
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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." -Refer to Figure 17-8. Faced with the shift of the Phillips curve from PC₁ to PC₂, policymakers will

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