Question 1

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Accepted Answer

The sacrifice ratio will be smaller beca...

Question 2

A favorable supply shock will cause inflation to

Accepted Answer

A)   rise and shift the short-run Phillips curve right.
B)   rise and shift the short-run Phillips curve left.
C)   fall and shift the short-run Phillips curve right.
D)   fall and shift the short-run Phillips curve left.E) All of the above
F) None of the above

Question 3

In the long run, inflation

Accepted Answer

A)   and unemployment are primarily determined by labor market factors.
B)   and unemployment are primarily determined by the rate of money supply growth.
C)   is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors.
D)   is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.E) A) and D)
F) All of the above

Question 4

Which of the following both make the sacrifice ratio higher than otherwise?

Accepted Answer

A)   the Phillips curve is steep, inflation expectations adjust quickly.
B)   the Phillips curve is steep, inflation expectations adjust slowly.
C)   the Phillips curve is flat, inflation expectations adjust quickly
D)   the Phillips curve is flat, inflation expectations adjust slowly.E) B) and C)
F) A) and B)

Question 5

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Accepted Answer

A)   right and the sacrifice ratio would fall.
B)   right and the sacrifice ratio would rise.
C)   left and the sacrifice ratio would fall.
D)   left and the sacrifice ratio would rise.E) B) and C)
F) A) and B)

Question 6

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

Question 7

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 C)
F) A) and D)

Question 8

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

Accepted Answer

The econom...

Question 9

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Accepted Answer

A) True 
 B)False

Question 10

Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

Accepted Answer

A)   The short-run Phillips curve would shift to the left.
B)   The short-run Phillips curve would shift to the right.
C)   The economy would move up and to the left along a given short-run Phillips curve.
D)   The economy would move down and to the right along a given short-run Phillips curve.E) B) and C)
F) C) and D)

Question 11

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Accepted Answer

The unempl...

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

Question 13

The monetary-policy framework called inflation targeting is used explicitly by

Accepted Answer

A)   no major country.
B)   most major countries except the United States and Japan.
C)   the United States, but it is not used by other major countries.
D)   most major countries, including the United States and Japan.E) A) and C)
F) None of the above

Question 14

A policy that raised the natural rate of unemployment would shift

Accepted Answer

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

Question 15

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Accepted Answer

A)   1/2.
B)   1.
C)   2.
D)   4.E) None of the above
F) B) and C)

Question 16

According to the short-run Phillips curve, if the central bank increases the money supply, then

Accepted Answer

A)   inflation and unemployment will both fall.
B)   inflation and unemployment will both rise.
C)   inflation will fall and unemployment will rise.
D)   inflation will rise and unemployment will fall.E) A) and D)
F) A) and B)

Question 17

Which of the following is upward-sloping?

Accepted Answer

A)   both the long-run and the short-run Phillips curve
B)   neither the long-run nor the short-run Phillips curve
C)   the long-run Phillips curve, but not the short-run Phillips curve
D)   the short-run Phillips curve, but not the long-run Phillips curveE) A) and C)
F) C) and D)

Question 18

Figure 35-7
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-7. Starting from C and 3, in the short run, an unexpected decrease 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) B) and C)
F) A) and D)

Question 19

The long-run Phillips curve would shift to the left if

Accepted Answer

A)   the money supply growth rate increased or labor markets become more flexible.
B)   the money supply growth rate increased but not if labor markets become more flexible.
C)   labor markets become more flexible but not if the money supply growth rate increased.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 20

Other things the same, a country that decides to reduce inflation will

Accepted Answer

A)   have a higher unemployment rate in the short run and the long run.
B)   have a higher unemployment rate only in the long run.
C)   have a higher unemployment rate only in the short run.
D)   not have a higher unemployment rate in either the short run or the long run.E) A) and D)
F) B) and D)

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

The long-run Phillips curve would shift to the left if

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In the long run, inflation

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A favorable supply shock will cause inflation to

Correct AnswerverifiedShow Answer

A policy that raised the natural rate of unemployment would shift

Correct AnswerverifiedShow Answer

The monetary-policy framework called inflation targeting is used explicitly by

Correct AnswerverifiedShow Answer

If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve.

Correct AnswerverifiedThe sacrifice ratio will be smaller beca...View AnswerShow Answer

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years, the sacrifice ratio is

Correct AnswerverifiedShow Answer

According to the short-run Phillips curve, if the central bank increases the money supply, then

Correct AnswerverifiedShow Answer

If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. Starting from C and 3, in the short run, an unexpected decrease in money supply growth moves the economy to

Correct AnswerverifiedShow Answer

Assume the natural rate of unemployment is 6%. Draw the short-run and long-run Phillips curves and show the position of the economy if expected inflation is 3% and the actual inflation rate is 2%.

Correct AnswerverifiedThe econom...View AnswerShow Answer

Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run?

Correct AnswerverifiedShow Answer

A change in expected inflation shifts

Correct AnswerverifiedShow Answer

Which of the following both make the sacrifice ratio higher than otherwise?

Correct AnswerverifiedShow Answer

Which of the following is upward-sloping?

Correct AnswerverifiedShow Answer

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Correct AnswerverifiedShow Answer

If policymakers expand aggregate demand, then in the long run

Correct AnswerverifiedShow Answer

For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is 8%, is the unemployment rate above or below its natural rate?

Correct AnswerverifiedThe unempl...View AnswerShow Answer

If efficiency wages became more common,

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Other things the same, a country that decides to reduce inflation will

Correct AnswerverifiedShow Answer

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The sacrifice ratio will be smaller beca...
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The econom...
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The unempl...
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