Question 1

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. Given the effects of the financial and housing crisis on the price level and output and the effects of increased world commodity prices on the price level and output, the aggregate demand and aggregate supply model tells us that

Accepted Answer

A)  output rises and the price level falls.
B)  output may rise, fall or stay the same and the price level rises.
C)  output falls and the price level may rise, fall or stay the same.
D)  None of the above is correct.E) B) and C)
F) C) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Accepted Answer

A) True 
 B)False

Question 4

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland publicizes that it intends to reduce the inflation rate to 5%. If Highlanders lower their inflation expectations, which curve shifts to the left?

Accepted Answer

A)  both the short-run and the long-run Phillips curves
B)  neither the short-run nor the long-run Phillips curves
C)  only the short-run Phillips curve
D)  only the long-run Phillips curveE) None of the above
F) A) and C)

Question 5

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Accepted Answer

A)  both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)  inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)  inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)  inflation is lower and unemployment is the same as it was prior to the change in policy.E) A) and B)
F) All of the above

Question 6

Samuelson and Solow argued that when unemployment is high,

Accepted Answer

A)  aggregate demand is high, which puts upward pressure on wages and prices.
B)  aggregate demand is high, which puts downward pressure on wages and prices.
C)  aggregate demand is low, which puts upward pressure on wages and prices.
D)  aggregate demand is low, which puts downward pressure on wages and prices.E) A) and B)
F) C) and D)

Question 7

If the Fed increases the growth rate of the money supply, in the long run which of the following is unchanged?

Accepted Answer

A)  the unemployment rate and inflation
B)  the unemployment rate but not inflation
C)  inflation but not the unemployment rate
D)  neither inflation nor the unemployment rateE) None of the above
F) A) and B)

Question 8

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

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 short-run effects of the housing and financial crisis are shown by

Accepted Answer

A)  moving to the right along the short-run Phillips curve.
B)  moving to the left along the short-run Phillips curve.
C)  shifting the short-run Phillips curve right.
D)  shifting the short-run Phillips curve left.E) All of the above
F) A) and C)

Question 10

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

Question 11

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 12

If inflation expectations rise, the short-run Phillips curve shifts

Accepted Answer

A)  right, so that at any inflation rate unemployment is higher in the short run than before.
B)  left, so that at any inflation rate unemployment is higher in the short run than before.
C)  right, so that at any inflation rate unemployment is lower in the short run than before.
D)  left, so that at any inflation rate unemployment is lower in the short run than before.E) None of the above
F) C) and D)

Question 13

Milton Friedman argued that the Fed's control over the money supply could be used to peg

Accepted Answer

A)  the level or growth rate of a nominal variable, but not the level or growth rate of a real variable.
B)  the level of a nominal or real variable, but not the growth rate of a real or nominal variable.
C)  the level or growth rate of a real variable, but not the level or growth rate of a nominal variable.
D)  both levels and growth rates of both real and nominal variables.E) All of the above
F) A) and C)

Question 14

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. In the short-run the housing and financial crises

Accepted Answer

A)  raised both the price level and output.
B)  raised the price level and reduced output.
C)  reduced the price level and raised output.
D)  reduced both the price level and output.E) A) and B)
F) C) and D)

Question 15

Which of the following would cause the price level to rise and output to fall in the short run?

Accepted Answer

A)  an increase in the money supply
B)  a decrease in the money supply
C)  an adverse supply shock
D)  a favorable supply shockE) C) and D)
F) A) and B)

Question 16

According to the short-run Phillips curve, inflation

Accepted Answer

A)  and unemployment would fall if the policymakers decreased the money supply.
B)  would fall and unemployment would rise if policymakers decreased the money supply.
C)  and unemployment would fall if the policymakers increased the money supply.
D)  would fall and unemployment would rise if policymakers increased the money supply.E) All of the above
F) B) and D)

Question 17

Which of the following is vertical?

Accepted Answer

A)  both the long-run Phillips curve and the long-run aggregate supply curve
B)  neither the long-run Phillips curve nor the long-run aggregate supply curve
C)  the long-run Phillips curve, but not the long-run aggregate supply curve
D)  the long-run Phillips curve, but not the long-run aggregate supply curve.E) A) and B)
F) C) and D)

Question 18

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Accepted Answer

A)  both inflation and the unemployment rate are higher than they were prior to the change in policy.
B)  inflation is higher and the unemployment rate is the same as it was prior to the change in policy.
C)  inflation is lower and the unemployment rate is lower than it was prior to the change in policy.
D)  inflation is lower and unemployment is the same as it was prior to the change in policy.E) C) and D)
F) B) and D)

Question 19

Suppose that the money supply increases. In the short run this decreases unemployment according to

Accepted Answer

A)  both the short-run Phillips curve and the aggregate demand and aggregate supply model.
B)  neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
C)  the short-run Phillips curve, but not the aggregate demand and supply model.
D)  the aggregate demand and aggregate supply model, but not the short-run Phillips curve.E) A) and D)
F) A) and C)

Question 20

A country is likely to have a higher sacrifice ratio if

Accepted Answer

A)  contracts are shorter, and people believe the central bank will reduce inflation.
B)  contracts are longer, and people believe the central bank will not reduce inflation
C)  contracts are longer, and people believe the central bank will reduce inflation.
D)  contracts are shorter, and people believe the central bank will not reduce inflation.E) B) and C)
F) A) and B)

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

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 short-run effects of the housing and financial crisis are shown by

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

Correct Answer
verified

Suppose that the money supply increases. In the short run this decreases unemployment according to

Correct Answer
verified

Samuelson and Solow argued that when unemployment is high,

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

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. In the short-run the housing and financial crises

Correct Answer
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If inflation expectations rise, the short-run Phillips curve shifts

Correct Answer
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In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Correct Answer
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Friedman and Phelps concluded that

Correct Answer
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Which of the following is vertical?

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A country is likely to have a higher sacrifice ratio if

Correct Answer
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Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Correct Answer
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If the Fed increases the growth rate of the money supply, in the long run which of the following is unchanged?

Correct Answer
verified

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Correct Answer
verified

Which of the following would cause the price level to rise and output to fall in the short run?

Correct Answer
verified

Milton Friedman argued that the Fed's control over the money supply could be used to peg

Correct Answer
verified

According to the short-run Phillips curve, inflation

Correct Answer
verified

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

Correct Answer
verified

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

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 short-run effects of the housing and financial crisis are shown by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that the money supply increases. In the short run this decreases unemployment according to

Correct AnswerverifiedShow Answer

Samuelson and Solow argued that when unemployment is high,

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

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. In the short-run the housing and financial crises

Correct AnswerverifiedShow Answer

If inflation expectations rise, the short-run Phillips curve shifts

Correct AnswerverifiedShow Answer

In the Friedman-Phelps analysis, when inflation is less than expected, the unemployment rate is less than the natural rate.

Correct AnswerverifiedShow Answer

Friedman and Phelps concluded that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is vertical?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A country is likely to have a higher sacrifice ratio if

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve pursues contractionary monetary policy. In the long run

Correct AnswerverifiedShow Answer

If the Fed increases the growth rate of the money supply, in the long run which of the following is unchanged?

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve makes monetary policy more expansionary. In the long run

Correct AnswerverifiedShow Answer

Which of the following would cause the price level to rise and output to fall in the short run?

Correct AnswerverifiedShow Answer

Milton Friedman argued that the Fed's control over the money supply could be used to peg

Correct AnswerverifiedShow Answer

According to the short-run Phillips curve, inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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