Question 1

Figure 35-2
Use the pair of diagrams below to answer the following questions.  
-Refer to Figure 35-2. 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 1.
C)  B and 3.
D)  None of the above is correct.E) None of the above
F) A) and C)

Question 2

If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run

Accepted Answer

A)  both the unemployment rate and the inflation rate would be lower.
B)  the unemployment rate would be lower and the inflation rate would be higher.
C)  the unemployment rate would be higher and the inflation rate would be lower.
D)  the unemployment rate and the inflation rate would be higher.E) A) and D)
F) B) and D)

Question 3

An increase in expected inflation shifts

Accepted Answer

A)  the long-run Phillips curve right.
B)  the short-run Phillips curve right.
C)  neither the short-run nor long-run Phillips curve right.
D)  both the short-run and long-run Phillips curve right.E) B) and D)
F) A) and D)

Question 4

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Accepted Answer

A)  rises. As inflation expectations adjust, the short-run Phillips curve shifts right.
B)  rises. As inflation expectations adjust, the short-run Phillips curve shifts left.
C)  falls. As inflation expectations adjust, the short-run Phillips curve shifts right.
D)  falls. As inflation expectations adjust, the short-run Phillips curve shifts left.E) All of the above
F) A) and C)

Question 5

In 1979, Fed chair Paul Volcker decided to pursue a policy

Accepted Answer

A)  that would lead to disinflation.
B)  that would create falling prices.
C)  to accommodate continuing adverse supply shocks.
D)  that maintained money growth at its current level.E) C) and D)
F) A) and B)

Question 6

If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing

Accepted Answer

A)  2 percent of annual output.
B)  6 percent of annual output.
C)  8 percent of annual output.
D)  11 percent of annual output.E) B) and C)
F) All of the above

Question 7

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 8

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly, on average the public thought

Accepted Answer

A)  he would try to fool them by raising inflation to decrease unemployment.
B)  inflation would be unchanged.
C)  inflation would fall but not by as much or as quickly as Volcker claimed.
D)  inflation would fall even further than Volcker was willing to admit.E) All of the above
F) C) and D)

Question 9

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 10

Refer to Monetary Policy in Flosserland. Suppose the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level. Suppose at first that the public thought inflation would only drop to 18%, but eventually become convinced that the inflation rate will stay at 12.5%.

Accepted Answer

A)  unemployment rises in the short run, and remains higher than it's original value in the long run.
B)  unemployment rises in the short run, and is the same as it's original value in the long run.
C)  unemployment falls in the short run, and is lower than it's original value in the long run.
D)  unemployment falls in the short run, and is the same as it's original value in the long run.E) C) and D)
F) A) and D)

Question 11

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Accepted Answer

A)  decreased the money supply.
B)  increased government expenditures.
C)  decreased taxes.
D)  None of the above is correct.E) A) and B)
F) All of the above

Question 12

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

Question 13

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Accepted Answer

A)  both the unemployment rate and the inflation rate would be higher.
B)  both the unemployment rate and the inflation rate would be lower.
C)  the unemployment rate would be higher and the inflation rate would be lower.
D)  the unemployment rate would be lower and the inflation rate would be higher.E) A) and C)
F) None of the above

Question 14

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve.
Actual inflation rate
Unemployment rate
5%
4%
4%
4) 5%
3%
5%
2%
5) 5%
Which of the following statements is correct?

Accepted Answer

A)  These points are consistent with the theoretical long-run Phillips curve, but not with the short-run Phillips curve.
B)  These points are consistent with the theoretical short-run Phillips curve, but not with the long-run Phillips curve.
C)  These points are consistent with both the theoretical short-run and long-run Phillips curves.
D)  These points are not consistent with either the theoretical short-run or long-run Phillips curves.E) B) and C)
F) B) and D)

Question 15

Prime Minister Emma Bigshot urges passage of a bill to reduce unemployment benefits from very generous levels in her country. She also urges her country's central bank to raise the rate at which the money supply is increasing. In the long run which, if either, of these policies will reduce the unemployment rate?

Accepted Answer

A)  both reducing the generosity of unemployment benefits and raising the rate at which the money supply is increasing
B)  reducing the generosity of unemployment benefits but not raising the rate at which the money supply is increasing
C)  raising the rate at which the money supply is increasing, but not reducing the generosity of unemployment benefits
D)  neither reducing the generosity of unemployment benefits nor raising the rate at which the money supply is increasingE) B) and D)
F) None of the above

Question 16

If policymakers decrease aggregate demand, then in the long run

Accepted Answer

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

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing

Correct Answer
verified

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Correct Answer
verified

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve. Actual inflation rate Unemployment rate 5% 4% 4% 4) 5% 3% 5% 2% 5) 5% Which of the following statements is correct?

Correct Answer
verified

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct Answer
verified

If policymakers decrease aggregate demand, then in the long run

Correct Answer
verified

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

Correct Answer
verified
The Phillips curve shows the relation be...
View Answer

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly, on average the public thought

Correct Answer
verified

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Correct Answer
verified

An adverse supply shock will shift short-run aggregate supply

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In 1979, Fed chair Paul Volcker decided to pursue a policy

Correct Answer
verified

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

Correct Answer
verified

If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run

Correct Answer
verified

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Correct Answer
verified

An increase in expected inflation shifts

Correct Answer
verified

Exam 35: The Short-Run Tradeoff Between Inflation and Unemployment

If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing

Correct AnswerverifiedShow Answer

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

Correct AnswerverifiedShow Answer

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve. Actual inflation rate Unemployment rate 5% 4% 4% 4) 5% 3% 5% 2% 5) 5% Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment

Correct AnswerverifiedShow Answer

If policymakers decrease aggregate demand, then in the long run

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

The consequences of the Volcker disinflation demonstrated that when Volcker announced his intention to reduce inflation quickly, on average the public thought

Correct AnswerverifiedShow Answer

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Correct AnswerverifiedShow Answer

An adverse supply shock will shift short-run aggregate supply

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 1979, Fed chair Paul Volcker decided to pursue a policy

Correct AnswerverifiedShow Answer

Figure 35-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

Correct AnswerverifiedShow Answer

If the government reduced the minimum wage and pursued contractionary monetary policy, then in the long run

Correct AnswerverifiedShow Answer

If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run

Correct AnswerverifiedShow Answer

An increase in expected inflation shifts

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The Phillips curve shows the relation be...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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