Question 1

In the long run,the inflation rate depends primarily on money supply growth.

Accepted Answer

A) True 
 B)False

Question 2

An adverse supply shock will shift short-run aggregate supply

Accepted Answer

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

Question 3

The existence of sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied

Accepted Answer

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

Question 4

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 B)
F) None of the above

Question 5

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 D)
F) All of the above

Question 6

Use the two graphs in the diagram to answer the following questions.
Figure 35-3
 
-Refer to Figure 35-3.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) A) and B)
F) None of the above

Question 7

Use the pair of diagrams below to answer the following questions.
Figure 35-1
 
-Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Accepted Answer

A)  a and 1.
B)  b and 2.
C)  c and 3.
D)  None of the above is correct.E) A) and C)
F) All of the above

Question 8

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 unemployment rate that the economy tends to move to in the long run.
D)  depends on the rate at which the Fed increases the money supply.E) None of the above
F) B) and D)

Question 9

Which of the following is correct?

Accepted Answer

A)  In the short run, policymakers face a tradeoff between inflation and unemployment.
B)  Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left.
C)  Unemployment can be changed only by the use of government policy.
D)  The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible.E) All of the above
F) A) and D)

Question 10

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

Question 11

A decrease in expected inflation shifts

Accepted Answer

A)  the long-run Phillips curve left.
B)  the short-run Phillips curve left.
C)  neither the short-run nor long-run Phillips curve left.
D)  both the short-run and long-run Phillips curve left.E) None of the above
F) C) and D)

Question 12

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

Question 13

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

Accepted Answer

A)  expected inflation is greater than actual inflation.
B)  expected inflation equals actual inflation.
C)  the quantity of goods and services demanded equals the quantity supplied.
D)  the quantity of labor demanded equals the quantity supplied.E) C) and D)
F) A) and B)

Question 14

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

Question 15

Friedman and Phelps concluded that

Accepted Answer

A)  in the long run the Phillips curve is downward sloping which is consistent with classical theory.
B)  in the long run the Philips curve is downward sloping which is inconsistent with classical theory.
C)  in the long run the Phillips curve is vertical which is consistent with classical theory.
D)  in the long run the Phillips curve is vertical which is inconsistent with classical theory.E) C) and D)
F) B) and C)

Question 16

Suppose that the central bank reduces the growth rate of the money supply.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) None of the above

Question 17

Figure 35-4
 
-Refer to figure 35-4.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) A) and B)
F) A) and C)

Question 18

Monetary Policy in Hyperion
In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years.
-Refer to Monetary Policy in Hyperion.Suppose that the Hyperion Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% but it actually raises inflation to 30%.Suppose that the public had expected that the Department of Finance would reduce inflation but only to 22%.Then

Accepted Answer

A)  unemployment falls, but it would have fallen less if people had been expecting 12.5% inflation.
B)  unemployment falls, but it would have fallen less if people had been expecting 25% inflation.
C)  unemployment rises, but it would have risen less if people had been expecting 12.5% inflation.
D)  unemployment rises, but it would have risen less if people had been expecting 25% inflation.E) B) and C)
F) None of the above

Question 19

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

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) A) and C)

Question 20

Use the two graphs in the diagram to answer the following questions.
Figure 35-3
 
-Refer to Figure 35-3.The economy would move from 3 to 5

Accepted Answer

A)  in the short run if money supply growth increased unexpectedly.
B)  in the short run if money supply growth decreased unexpectedly.
C)  in the long run if money supply growth increases.
D)  in the long run if money supply growth decreases.E) A) and B)
F) A) and C)

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

Suppose that the central bank reduces the growth rate of the money supply.In the short-run the effects of this are shown by

Correct Answer
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Which of the following is correct?

Correct Answer
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Correct Answer
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Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.The economy would move from 3 to 5

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

A change in expected inflation shifts

Correct Answer
verified

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

Correct Answer
verified

Use the pair of diagrams below to answer the following questions. Figure 35-1 -Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Correct Answer
verified

The existence of sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied

Correct Answer
verified

Friedman and Phelps concluded that

Correct Answer
verified

An adverse supply shock will shift short-run aggregate supply

Correct Answer
verified

If policymakers expand aggregate demand,then in the long run

Correct Answer
verified

Figure 35-4 -Refer to figure 35-4.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 Answer
verified

The natural rate of unemployment

Correct Answer
verified

A decrease in expected inflation shifts

Correct Answer
verified

In the long run,the inflation rate depends primarily on money supply growth.

Correct Answer
verified

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.Starting from c and 3,in the short run an unexpected increase in money supply growth moves the economy to

Correct Answer
verified

Phillips found a

Correct Answer
verified

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

Suppose that the central bank reduces the growth rate of the money supply.In the short-run the effects of this are shown by

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.The economy would move from 3 to 5

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A change in expected inflation shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Use the pair of diagrams below to answer the following questions. Figure 35-1 -Refer to Figure 35-1.If the economy starts at c and 1,then in the short run,an increase in the money supply growth rate moves the economy to

Correct AnswerverifiedShow Answer

The existence of sticky wages leads to a positive relationship between the actual price level and the quantity of output supplied

Correct AnswerverifiedShow Answer

Friedman and Phelps concluded that

Correct AnswerverifiedShow Answer

An adverse supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

If policymakers expand aggregate demand,then in the long run

Correct AnswerverifiedShow Answer

Figure 35-4 -Refer to figure 35-4.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

The natural rate of unemployment

Correct AnswerverifiedShow Answer

A decrease in expected inflation shifts

Correct AnswerverifiedShow Answer

In the long run,the inflation rate depends primarily on money supply growth.

Correct AnswerverifiedShow Answer

Use the two graphs in the diagram to answer the following questions. Figure 35-3 -Refer to Figure 35-3.Starting from c and 3,in the short run an unexpected increase in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

Phillips found a

Correct AnswerverifiedShow Answer

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