Question 1

A central bank that accommodates an aggregate supply shock

Accepted Answer

A)   increases the money supply, making the inflation rate rise.
B)   increases the money supply, making the inflation rate fall.
C)   decreases the money supply, making the inflation rate rise.
D)   decreases the money supply, making the inflation rate fall.E) A) and D)
F) A) and C)

Question 2

The misery index is supposed to measure the

Accepted Answer

A)   social cost of unemployment.
B)   health of the economy.
C)   lost output associated with a particular unemployment rate.
D)   short-run tradeoff between inflation and unemployment.E) B) and D)
F) All of the above

Question 3

The position of the long-run Phillips curve depends on

Accepted Answer

A)   the inflation rate and the natural rate of unemployment.
B)   the inflation rate but not the natural rate of unemployment.
C)   the natural rate of unemployment, but not the inflation rate.
D)   neither the natural rate of unemployment nor the inflation rate.E) C) and D)
F) All of the above

Question 4

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A)   the short-run Phillips curve shifts left
B)   unemployment falls
C)   the price level rises
D)   output rises.E) A) and C)
F) C) and D)

Question 5

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

Question 6

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

Accepted Answer

A)   reduces expected inflation so the long-run Phillips curve shifts left.
B)   reduces expected inflation so the short-run Phillips curve shifts left.
C)   Both A and B are correct.
D)   None of the above is correct.E) A) and C)
F) All of the above

Question 7

If there is an adverse supply shock, then

Accepted Answer

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

Question 8

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

Accepted Answer

A)   increases inflation and shifts the short-run Phillips curve right.
B)   increases inflation and shifts the short-run Phillips curve left.
C)   decreases inflation and shifts the short-run Philips curve right.
D)   decreases inflation and shifts the short-run Phillips curve left.E) A) and D)
F) All of the above

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Figure 17-2
Use the pair of diagrams below to answer the following questions.
 
-Refer to Figure 17-2. 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 D)
F) C) and D)

Question 11

The large increase in oil prices in the 1970s was caused primarily by a(n)

Accepted Answer

A)   increase in demand for oil.
B)   decrease in demand for oil.
C)   decrease in the supply of oil.
D)   increase in the supply of oil.E) None of the above
F) B) and D)

Question 12

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Accepted Answer

A)   Louise reads in the newspaper that the central bank recently raised the money supply.
B)   Eric gets fewer job offers
C)   Jack makes larger increases in the prices at his health food store.
D)   Maria's nominal wage increase is larger.E) A) and C)
F) All of the above

Question 13

Which of the following is not 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) None of the above
F) B) and D)

Question 14

If the central bank increases the money supply, then in the short run prices

Accepted Answer

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

Question 15

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

If people correctly anticipate that inflation will fall by 1%, then

Accepted Answer

A)   the short-run Phillips curve shifts right and unemployment is unchanged.
B)   the short-run Phillips curve shifts right and unemployment rises.
C)   the short-run Phillips curve shifts left and unemployment is unchanged.
D)   the short-run Phillips curve would shift left and unemployment falls.E) A) and B)
F) A) and C)

Question 18

In the long run, which of the following depends primarily on the growth rate of the money supply?

Accepted Answer

A)   the natural rate of unemployment and the inflation rate
B)   the natural rate of unemployment but not the inflation rate
C)   the inflation rate but not the natural rate of unemployment
D)   neither the natural rate of unemployment nor the inflation rateE) A) and D)
F) A) and C)

Question 19

Proponents of rational expectations argued that the sacrifice ratio

Accepted Answer

A)   could be high because it was rational for people not to immediately change their expectations.
B)   could be high because people might adjust their expectations quickly if they found anti-inflation policy credible.
C)   could be low because it was rational for people not to immediately change their expectations.
D)   could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.E) A) and C)
F) A) and D)

Question 20

On a given short-run Phillips curve which of the following is not held constant?

Accepted Answer

A)   the level of GDP
B)   the position of the aggregate-supply curve
C)   expected inflation
D)   the expected growth rate of the money supplyE) A) and B)
F) B) and C)

Exam 17: The Short-Run Trade-Off Between Inflation and Unemployment

Figure 17-2 Use the pair of diagrams below to answer the following questions. -Refer to Figure 17-2. 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

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If people correctly anticipate that inflation will fall by 1%, then

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A central bank that accommodates an aggregate supply shock

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

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A policy that raised the natural rate of unemployment would shift

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If there is an adverse supply shock, then

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Which of the following is not correct?

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In the long run, which of the following depends primarily on the growth rate of the money supply?

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Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

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The misery index is supposed to measure the

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

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Proponents of rational expectations argued that the sacrifice ratio

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The large increase in oil prices in the 1970s was caused primarily by a(n)

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If the central bank increases the money supply, then in the short run prices

Correct AnswerverifiedShow Answer

Which of the following would not be associated with a favorable supply shock?

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

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On a given short-run Phillips curve which of the following is not held constant?

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

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A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

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The position of the long-run Phillips curve depends on

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