Question 1

In the long run, an increase in the money supply growth rate

Accepted Answer

A)  raises expected inflation so the short-run Phillips curve shifts right.
B)  raises expected inflation so the short-run Phillips curve shifts left.
C)  reduces expected inflation so the short-run Phillips curve shifts left.
D)  None of the above is correct.E) B) and D)
F) None of the above

Question 2

If policymakers expand aggregate demand, then in the long run

Accepted Answer

A)  prices will be higher and unemployment will be lower.
B)  prices will be higher and unemployment will be unchanged.
C)  prices and unemployment will be unchanged.
D)  None of the above is correct.E) None of the above
F) C) and D)

Question 3

Figure 22-2
Use the pair of diagrams below to answer the following questions. 
-Refer to Figure 22-2. 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) A) and B)
F) A) and D)

Question 4

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

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

Question 5

If there is an adverse supply shock, then

Accepted Answer

A)  unemployment rises and the short-run Phillips curve shifts right.
B)  unemployment rises and the short-run Phillips curve shifts left.
C)  unemployment falls and the short-run Phillips curve shifts right.
D)  unemployment falls and the short-run Phillips curve shifts left.E) B) and C)
F) C) and D)

Question 6

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 7

According to the long-run Phillips curve, in the long run monetary policy influences

Accepted Answer

A)  inflation but not the unemployment rate; this is consistent with classical theory.
B)  inflation but not the unemployment rate; this is inconsistent with classical theory.
C)  the unemployment rate but not inflation; this is consistent with classical theory.
D)  the unemployment rate but not inflation; this is inconsistent with classical theory.E) B) and D)
F) A) and C)

Question 8

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Accepted Answer

A)  is completely correct.
B)  is completely wrong.
C)  is true for the short run but not the long run.
D)  is true for the long run but not the short run.E) A) and B)
F) A) and D)

Question 9

Figure 22-6
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 22-6. 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) C) and D)

Question 10

According to the Phillips curve, unemployment and inflation are positively related in

Accepted Answer

A)  the short run and in the long run.
B)  the short run, but not in the long run.
C)  the long run, but not in the short run.
D)  neither the long run nor the short run.E) A) and B)
F) All of the above

Question 11

If an increase in inflation permanently reduced unemployment then,

Accepted Answer

A)  money would not be neutral and the long-run Phillips curve would slope upward.
B)  money would not be neutral and the long-run Phillips curve would slope downward.
C)  money would be neutral and the long-run Phillips curve would slope upward.
D)  money would be neutral and the long-run Phillips curve would slope downward.E) C) and D)
F) A) and C)

Question 12

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland reduced inflation to its announced goal of 5%. However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year. Which of the following is correct?

Accepted Answer

A)  Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 3.
B)  Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 1.
C)  Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 3.
D)  Initially people's inflation expectations had been lower than 5%. The sacrifice ratio was 1.E) B) and C)
F) A) and C)

Question 13

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Accepted Answer

A)  the natural rate of unemployment and monetary growth.
B)  the natural rate of unemployment, but not monetary growth.
C)  monetary growth, but not the natural rate of unemployment.
D)  neither monetary growth nor the natural rate of unemployment.E) A) and C)
F) A) and B)

Question 14

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

Accepted Answer

A)  raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right.
B)  raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.
C)  reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right.
D)  reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.E) B) and D)
F) A) and D)

Question 15

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Accepted Answer

Friedman and Phelps predicted that, over...

Question 16

If inflation is less than expected, then the unemployment rate is

Accepted Answer

A)  greater than the natural rate. In the long run the short-run Phillips curve will shift right.
B)  greater than the natural rate. In the long run the short-run Phillips curve will shift left.
C)  less than the natural rate. In the long run the short-run Phillips curve will shift right.
D)  less than the natural rate. In the long run the short-run Phillips curve will shift left.E) A) and B)
F) B) and C)

Question 17

Figure 22-7
Use this graph to answer the questions below. 
-Refer to figure 22-7. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A)  7% unemployment and 1% inflation
B)  7% unemployment and 3% inflation
C)  3% unemployment and 5% inflation
D)  3% unemployment and 7% inflationE) B) and C)
F) All of the above

Question 18

In 1980, the U.S. misery index was

Accepted Answer

A)  much higher than average.
B)  slightly higher than average.
C)  about average.
D)  below average.E) A) and D)
F) B) and C)

Question 19

Figure 22-1. 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 22-1. 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. Then it is apparent that the price index equaled

Accepted Answer

A)  130 in 2011.
B)  115 in 2011.
C)  110 in 2011.
D)  100 in 2011.E) C) and D)
F) A) and B)

Question 20

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%, then

Accepted Answer

A)  unemployment falls but it would have fallen by more if the Bank of highland had reduced inflation to 5% rather than 3%.
B)  unemployment falls but it would have fallen by less if the Bank of highland had reduced inflation to 5% rather than 3%.
C)  unemployment rises but it would have risen by more if the Bank of highland had reduced inflation to 5% rather than 3%.
D)  unemployment rises but it would have risen by less if the Bank of highland had reduced inflation to 5% rather than 3%.E) B) and D)
F) None of the above

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

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Correct Answer
verified

According to the long-run Phillips curve, in the long run monetary policy influences

Correct Answer
verified

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct Answer
verified

If policymakers expand aggregate demand, then in the long run

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In 1980, the U.S. misery index was

Correct Answer
verified

Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves the economy to

Correct Answer
verified

Correct Answer
verified

In the long run, an increase in the money supply growth rate

Correct Answer
verified

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

Correct Answer
verified

If an increase in inflation permanently reduced unemployment then,

Correct Answer
verified

If inflation is less than expected, then the unemployment rate is

Correct Answer
verified

Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Correct Answer
verified

If there is an adverse supply shock, then

Correct Answer
verified

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Correct Answer
verified

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Correct Answer
verified

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Correct Answer
verified
Friedman and Phelps predicted that, over...
View Answer

According to the Phillips curve, unemployment and inflation are positively related in

Correct Answer
verified

Correct Answer
verified

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

If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Correct AnswerverifiedShow Answer

According to the long-run Phillips curve, in the long run monetary policy influences

Correct AnswerverifiedShow Answer

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on

Correct AnswerverifiedShow Answer

If policymakers expand aggregate demand, then in the long run

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 1980, the U.S. misery index was

Correct AnswerverifiedShow Answer

Figure 22-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 22-2. 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

Correct AnswerverifiedShow Answer

In the long run, an increase in the money supply growth rate

Correct AnswerverifiedShow Answer

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

Correct AnswerverifiedShow Answer

If an increase in inflation permanently reduced unemployment then,

Correct AnswerverifiedShow Answer

If inflation is less than expected, then the unemployment rate is

Correct AnswerverifiedShow Answer

Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6. Starting from C and 3, in the short run an unexpected increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

If there is an adverse supply shock, then

Correct AnswerverifiedShow Answer

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Correct AnswerverifiedShow Answer

The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument

Correct AnswerverifiedShow Answer

What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?

Correct AnswerverifiedFriedman and Phelps predicted that, over...View AnswerShow Answer

According to the Phillips curve, unemployment and inflation are positively related in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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verified
Friedman and Phelps predicted that, over...
View Answer

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Correct Answer
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