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Samuelson and Solow argued that when unemployment is high,


A) aggregate demand is high, which puts upward pressure on wages and prices.
B) aggregate demand is high, which puts downward pressure on wages and prices.
C) aggregate demand is low, which puts upward pressure on wages and prices.
D) aggregate demand is low, which puts downward pressure on wages and prices.

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

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If the unemployment rate is below the natural rate, then


A) inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift right.
B) inflation is less than expected. As inflation expectations are revised the short-run Phillips curve will shift left.
C) inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift left.
D) inflation is greater than expected. As inflation expectations are revised the short-run Phillips curve will shift right.

E) C) and D)
F) None of the above

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In the long run, policy that changes aggregate demand changes


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

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

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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. 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. The curve that is depicted on the right­hand graph offers policymakers a menu of combinations A) that applies both in the short run and in the long run. B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. C) of inflation and unemployment. D) All of the above are correct. 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. The curve that is depicted on the right­hand graph offers policymakers a menu of combinations A) that applies both in the short run and in the long run. B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy. C) of inflation and unemployment. D) All of the above are correct. -Refer to Figure 35-1. The curve that is depicted on the right­hand graph offers policymakers a "menu" of combinations


A) that applies both in the short run and in the long run.
B) that is relevant to choices involving fiscal policy, but not to choices involving monetary policy.
C) of inflation and unemployment.
D) All of the above are correct.

E) C) and D)
F) B) and C)

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Figure 35-6 Use the graph below to answer the following questions. Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. The money supply growth rate is greatest at A) A. B) B. C) C. D) F. -Refer to Figure 35-6. The money supply growth rate is greatest at


A) A.
B) B.
C) C.
D) F.

E) All of the above
F) B) and D)

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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. 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. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to A) point A on the left-hand graph. B) point B on the left-hand graph. C) point C on the left-hand graph. D) point D on the left-hand graph. 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. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to A) point A on the left-hand graph. B) point B on the left-hand graph. C) point C on the left-hand graph. D) point D on the left-hand graph. -Refer to Figure 35-1. Assuming the price level in the previous year was 100, point G on the right-hand graph corresponds to


A) point A on the left-hand graph.
B) point B on the left-hand graph.
C) point C on the left-hand graph.
D) point D on the left-hand graph.

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

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A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would


A) increase the rate at which the money supply increases. This will also move inflation closer to its previous rate..
B) increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate
C) decrease the rate at which the money supply increases. This will also move inflation closer to its original rate
D) decrease the rate at which the money supply increases. However, this will make higher than its previous rate.

E) B) and D)
F) A) and D)

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


A) inflation and unemployment will be higher.
B) inflation will be higher and unemployment will be lower.
C) inflation will be lower and unemployment will be higher.
D) None of the above is correct.

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

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By raising aggregate demand more than anticipated, policymakers


A) reduce unemployment for awhile.
B) raise unemployment for awhile.
C) reduce unemployment permanently.
D) None of the above is correct.

E) A) and C)
F) All of the above

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Figure 35-9. 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." Figure 35-9. 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 35-9. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as A) the outcome of a favorable supply shock. B) falling inflation. C) stagflation. D) All of the above are correct. Figure 35-9. 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 35-9. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as A) the outcome of a favorable supply shock. B) falling inflation. C) stagflation. D) All of the above are correct. -Refer to Figure 35-9. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as


A) the outcome of a favorable supply shock.
B) falling inflation.
C) stagflation.
D) All of the above are correct.

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

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If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is


A) 1.
B) 2.
C) 3.
D) None of the above is correct.

E) A) and C)
F) A) and D)

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Suppose the price level is 115.00 at the end of 2020, 112.02 at the end of 2021, and 109.08 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

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No. Since the price level is f...

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Proponents of rational expectations argued that the sacrifice ratio


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

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If policymakers decrease aggregate demand, then in the short run the price level


A) falls and unemployment rises.
B) and unemployment fall.
C) and unemployment rise.
D) rises and unemployment falls.

E) A) and D)
F) C) and D)

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Which of the following leads to a lower level of unemployment in the long run?


A) both an increase in the size of the money supply and an increase in the money supply growth rate
B) an increase in the size of the money supply but not an increase in the money supply growth rate
C) an increase in the money supply growth rate, but not an increase in the size of the money supply
D) neither an increase in the size of the money supply nor an increase in the money supply growth rate

E) A) and C)
F) All of the above

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


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) None of the above

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Suppose that the money supply increases. In the short run this decreases unemployment according to


A) both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B) neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C) the short-run Phillips curve, but not according to the aggregate demand and supply model.
D) the aggregate demand and aggregate supply model, but not according to the short-run Phillips curve.

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

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Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?


A) Inflation is reduced from 4 percent to 1 percent, and annual output falls by 10 percent.
B) Inflation is reduced from 6 percent to 4 percent, and annual output falls by 10 percent.
C) Inflation is reduced from 8 percent to 5 percent, and annual output falls by 9 percent.
D) Inflation is reduced from 3 percent to 2 percent, and annual output falls by 3 percent.

E) B) and C)
F) C) and D)

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Which of the following shifts aggregate supply to the right?


A) a decline in the price of imported natural resources
B) a technological advance
C) an older labor force that leaves jobs less frequently
D) All of the above are correct.

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

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Contractionary monetary policy


A) leads to disinflation and makes the short-run Phillips curve shift right.
B) leads to disinflation and makes the short-run Phillips curve shift left.
C) does not lead to disinflation but makes the short-run Phillips curve shift right.
D) does not lead to disinflation but makes the short-run Phillips curve shift left.

E) B) and C)
F) B) and D)

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