Question 1

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

Accepted Answer

If expected inflation decrease...

Question 2

If the central bank increases the money supply, in the short run, the price level

Accepted Answer

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

Question 3

Figure 35-7
Use the two graphs in the diagram to answer the following questions.
  
-Refer to Figure 35-7. The economy would move from C to B

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

Question 4

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 5

In the long run an increase 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 D)
F) A) and C)

Question 6

More flexible labor markets will shift

Accepted Answer

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

Question 7

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Accepted Answer

A)   If so, this might have been the result of a negative supply shock or an increase in expected inflation.
B)   If so, this might been the result of a negative supply shock, or a decrease in expected inflation.
C)   If so, this might have been the result of a positive supply shock, or an increase in expected inflation.
D)   If so, this might have been the result of a positive supply shock, or a decrease in expected inflation.E) A) and B)
F) A) and C)

Question 8

The equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) ,

Accepted Answer

A)   is the equation of the short-run Phillips curve.
B)   implies there can be no stable short-run Phillips curve.
C)   reflects the reasoning of Friedman and Phelps.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 9

Refer to Monetary Policy in Flosserland. Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. Suppose that the public was very skeptical and in fact thought the Flosserland Department of Finance was going to raise inflation to 30% so it could increase its expenditures. Then

Accepted Answer

A)   unemployment falls, but it would have fallen less if people had been expecting 25% inflation.
B)   unemployment falls, but it would have fallen less if people had been expecting 35% inflation.
C)   unemployment rises, but it would have risen less if people had been expecting 25% inflation.
D)   unemployment rises, but it would have risen less if people had been expecting 35% inflation.E) B) and C)
F) A) and B)

Question 10

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

Question 11

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Accepted Answer

A)   only in the long run.
B)   only in the short run.
C)   in neither the long run nor short run.
D)   in both the short run and long run.E) A) and B)
F) None of the above

Question 12

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Accepted Answer

A)   is greater than expected inflation.
B)   is less than expected inflation.
C)   equals expected inflation.
D)   low whether its greater than or less than expected.E) B) and D)
F) None of the above

Question 13

The proliferation of Internet usage serves as an example of a favorable supply shock.

Accepted Answer

A) True 
 B)False

Question 14

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Accepted Answer

A)   7% unemployment and 1% inflation
B)   7% unemployment and 3% inflation
C)   3% unemployment and 5% inflation
D)   3% unemployment and 7% inflationE) B) and D)
F) All of the above

Question 15

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Accepted Answer

A)   unemployment rises. In the long run the short-run Phillips curve shifts left.
B)   unemployment rises. In the long run the short-run Phillips curve shifts right.
C)   unemployment falls. In the long run the short-run the Phillips curve shifts left.
D)   unemployment falls. In the long run the short-run the Phillips curve shifts right.E) B) and C)
F) A) and B)

Question 16

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 4%.

Accepted Answer

The econom...

Question 17

Refer to Monetary Policy in Flosserland. Suppose Flosserland has had the same inflation rate for a long time. Which, if either, of the following ideas imply that the unemployment rate in Flosserland would be above the natural rate.

Accepted Answer

A)   both the Classical dichotomy and the long-run Phillips curve
B)   the Classical dichotomy, but not the long run Phillips curve
C)   the long-run Phillips curve, but not the Classical dichotomy
D)   neither the long-run Phillips curve nor the Classical dichotomyE) A) and B)
F) A) and C)

Question 18

Disinflation is a reduction in

Accepted Answer

A)   the price level.
B)   the inflation rate.
C)   the consumer price index.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 19

If consumption expenditures fall, then in the short run

Accepted Answer

A)   inflation and unemployment rise.
B)   inflation rises and unemployment falls.
C)   inflation falls and unemployment rises.
D)   inflation and unemployment fall.E) B) and C)
F) None of the above

Question 20

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

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

Correct Answer
verified

If the central bank increases the money supply, in the short run, the price level

Correct Answer
verified

If consumption expenditures fall, then in the short run

Correct Answer
verified

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

Correct Answer
verified

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

Correct Answer
verified
If expected inflation decrease...
View Answer

Friedman and Phelps concluded that

Correct Answer
verified

Correct Answer
verified

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Correct Answer
verified

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 Answer
verified

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Correct Answer
verified

Disinflation is a reduction in

Correct Answer
verified

Refer to Monetary Policy in Flosserland. Suppose Flosserland has had the same inflation rate for a long time. Which, if either, of the following ideas imply that the unemployment rate in Flosserland would be above the natural rate.

Correct Answer
verified

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Correct Answer
verified

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

Correct Answer
verified

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Correct Answer
verified

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Correct Answer
verified

More flexible labor markets will shift

Correct Answer
verified

The equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) ,

Correct Answer
verified

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 4%.

Correct Answer
verified
The econom...
View Answer

The proliferation of Internet usage serves as an example of a favorable supply shock.

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

If the central bank increases the money supply, in the short run, the price level

Correct AnswerverifiedShow Answer

If consumption expenditures fall, then in the short run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If expected inflation decreases does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?

Correct AnswerverifiedIf expected inflation decrease...View AnswerShow Answer

Friedman and Phelps concluded that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the inflation rate permanently reduces the natural rate of unemployment.

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

Considering a plot of the inflation rate and the unemployment rate, one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

Correct AnswerverifiedShow Answer

Disinflation is a reduction in

Correct AnswerverifiedShow Answer

Refer to Monetary Policy in Flosserland. Suppose Flosserland has had the same inflation rate for a long time. Which, if either, of the following ideas imply that the unemployment rate in Flosserland would be above the natural rate.

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment

Correct AnswerverifiedShow Answer

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7. The economy would move from C to B

Correct AnswerverifiedShow Answer

According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation

Correct AnswerverifiedShow Answer

If the central bank increases the growth rate of the money supply and initially inflation expectations are unchanged, then in the short run

Correct AnswerverifiedShow Answer

More flexible labor markets will shift

Correct AnswerverifiedShow Answer

The equation, Unemployment rate = Natural rate of unemployment - a × Αctual inflation - Expected inflation) ,

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 4%.

Correct AnswerverifiedThe econom...View AnswerShow Answer

The proliferation of Internet usage serves as an example of a favorable supply shock.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If expected inflation decrease...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The econom...
View Answer

Correct Answer
verified