Question 1

According to the Phillips curve, unemployment and inflation are negatively 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) All of the above
F) A) and C)

Question 2

Figure 22-5
Use the graph below to answer the following questions. 
-Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, in the long run the economy

Accepted Answer

A)  stays at C.
B)  moves to B.
C)  moves to F.
D)  None of the above is consistent wit an increase in the money supply growth rate.E) B) and D)
F) A) and D)

Question 3

The natural rate of unemployment

Accepted Answer

A)  is constant over time.
B)  varies over time, but can't be changed by the government.
C)  is the socially desirable rate of unemployment.
D)  does not depend on the rate at which the Fed increases the money supply.E) B) and D)
F) A) and D)

Question 4

The short-run Phillips curve intersects the long-run Phillips curve where

Accepted Answer

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

Question 5

According to Friedman and Phelps's analysis of the Phillips curve,

Accepted Answer

A)  the unemployment rate will be below its natural rate whenever inflation is negative.
B)  the unemployment rate will be below its natural rate whenever inflation is positive.
C)  the unemployment rate will be below its natural rate only if inflation is less than expected.
D)  the unemployment rate will be below its natural rate only if inflation is greater than expected.E) B) and C)
F) None of the above

Question 6

An adverse supply shock causes inflation to

Accepted Answer

A)  rise and the short-run Phillips curve to shift right.
B)  rise and the short-run Phillips curve to shift left.
C)  fall and the short-run Phillips curve to shift right.
D)  fall and the short-run Phillips curve to shift left.E) A) and D)
F) B) and C)

Question 7

In the long run a reduction in the money supply growth rate affects

Accepted Answer

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

Question 8

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Accepted Answer

A) True 
 B)False

Question 9

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 affecting the economy.
-Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Accepted Answer

A)  aggregate demand to the right.
B)  aggregate demand to the left.
C)  aggregate supply to the right.
D)  aggregate supply to the left.E) A) and B)
F) All of the above

Question 10

If the government raises government expenditures, then in the short run prices

Accepted Answer

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

Question 11

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

Question 12

In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

Accepted Answer

A)  raised unemployment and inflation.
B)  raised unemployment and reduced inflation.
C)  reduced unemployment and raised inflation.
D)  reduced unemployment and inflation.E) A) and B)
F) None of the above

Question 13

One determinant of the natural rate of unemployment is the

Accepted Answer

A)  rate of growth of the money supply.
B)  minimum wage rate.
C)  expected inflation rate.
D)  All of the above are correct.E) B) and C)
F) C) and D)

Question 14

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

Accepted Answer

A)  an increase in both the inflation rate and the unemployment rate.
B)  an increase in the inflation rate and a reduction in the unemployment rate.
C)  no change in either the inflation rate or the unemployment rate.
D)  an increase in the inflation rate and no change in the unemployment rate.E) A) and C)
F) All of the above

Question 15

Suppose that money supply growth increases. In the long run, this increases employment according to

Accepted Answer

A)  both the long-run Phillips curve and the aggregate demand and aggregate supply model.
B)  neither the long-run Phillips curve nor the aggregate demand and aggregate supply model.
C)  the long-run Phillips curve, but not the aggregate demand and aggregate supply model.
D)  the aggregate demand and aggregate supply model, but not the long-run Phillips curveE) All of the above
F) C) and D)

Question 16

A favorable supply shock will shift short-run aggregate supply

Accepted Answer

A)  left, making output rise.
B)  left, making output fall.
C)  right, making output rise.
D)  right, making output fall.E) C) and D)
F) B) and D)

Question 17

If a central bank decreases 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) A) and D)
F) All of the above

Question 18

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) None of the above

Question 19

If efficiency wages became more common,

Accepted Answer

A)  both the long-run Phillips curve and the long-run aggregate supply curve would shift right.
B)  both the long-run Phillips curve and the long-run aggregate supply curve would shift left.
C)  the long-run Phillips curve would shift right, and the long-run aggregate supply curve would shift left.
D)  the long-run Phillips curve would shift left, and the long-run aggregate supply curve would shift right.E) None of the above
F) A) and C)

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

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

An adverse supply shock causes inflation to

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If the government raises government expenditures, then in the short run prices

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If efficiency wages became more common,

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A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to

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

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If a central bank decreases 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?

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One determinant of the natural rate of unemployment is the

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According to Friedman and Phelps's analysis of the Phillips curve,

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A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Correct AnswerverifiedShow Answer

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

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Phillips found a

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In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have

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Suppose that money supply growth increases. In the long run, this increases employment according to

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A favorable supply shock will shift short-run aggregate supply

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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 affecting the economy. -Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

Correct AnswerverifiedShow Answer

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

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The natural rate of unemployment

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The short-run Phillips curve intersects the long-run Phillips curve where

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In the long run a reduction in the money supply growth rate affects

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Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, in the long run the economy

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