Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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)

Question 3

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Accepted Answer

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

Question 4

If inflation expectations decline, then the short-run Phillips curve shifts

Accepted Answer

A)  left, so that at any inflation rate unemployment is lower in the short run than before.
B)  right, so that at any inflation rate unemployment is lower in the short run than before.
C)  right, so that at any inflation rate unemployment is higher in the short run than before.
D)  left, so that at any inflation rate unemployment is higher in the short run than before.E) A) and B)
F) A) and C)

Question 5

Which of the following is correct if there is an adverse supply shock?

Accepted Answer

A)  The short-run aggregate supply curve and the short-run Phillips curve both shift right.
B)  The short-run aggregate supply curve and the short-run Phillips curve both shift left.
C)  The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
D)  The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.E) A) and B)
F) B) and C)

Question 6

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Accepted Answer

A) True 
 B)False

Question 7

If there is a favorable supply shock which direction does the short-run Phillips curve shift? What initially happens to unemployment and inflation as a result of this shock?

Accepted Answer

The short-run Philli...

Question 8

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 taxes moves the economy to

Accepted Answer

A)  B and 2.
B)  D and 3.
C)  E and 2.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 9

Suppose the price level is 110.00 at the end of 2020, 121.00 at the end of 2021, and 128.26 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

Accepted Answer

Yes. The rate of inflation for 2021 was ...

Question 10

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) None of the above

Question 11

If the Federal Reserve increases the growth rate of the money supply, in the long run

Accepted Answer

A)  inflation is higher and the unemployment rate is lower.
B)  inflation is higher while the unemployment rate is unchanged.
C)  inflation is unchanged while the unemployment rate is lower.
D)  None of the above is correct.E) B) and D)
F) None of the above

Question 12

In 1980, the U.S. economy had an inflation rate of

Accepted Answer

A)  about 1 percent and an unemployment rate of about 7 percent.
B)  less than 4 percent and an unemployment rate of less than 6 percent.
C)  less than 7 percent and an unemployment rate of about 9 percent.
D)  more than 9 percent and an unemployment rate of about 7 percent.E) B) and C)
F) A) and C)

Question 13

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

Accepted Answer

A)  shifts both the long-run and the short-run Phillips curves right.
B)  shifts the long-run Phillips curve left and the short-run Phillips curve right.
C)  shifts the long-run Phillips curve right and the short-run Phillips curve left.
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 14

A favorable supply shock shifts the short-run Phillips curve

Accepted Answer

A)  right and inflation rises.
B)  right and inflation falls.
C)  left and inflation rises.
D)  left and inflation falls.E) None of the above
F) A) and D)

Question 15

By about 1973, U.S. policymakers had learned that

Accepted Answer

A)  there is no trade-off between inflation and unemployment in the short run.
B)  there is no trade-off between inflation and unemployment in the long run.
C)  Friedman's analysis of inflation and unemployment had been correct, and Phelps's analysis of inflation and unemployment had been incorrect.
D)  Phelps's analysis of inflation and unemployment had been correct, and Friedman's analysis of inflation and unemployment had been incorrect.E) C) and D)
F) A) and C)

Question 16

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

Question 17

Disinflation is a

Accepted Answer

A)  reduction in the price level, whereas deflation is a reduction in the rate of inflation.
B)  reduction in the rate of inflation, whereas deflation is a reduction in the price level.
C)  slow reduction in the price level, whereas deflation is a rapid reduction in the price level.
D)  rapid reduction in the price level, whereas deflation is a slow reduction in the price level.E) A) and B)
F) C) and D)

Question 18

Which of the following would tend to shorten recessions associated with anti-inflation policies by central banks?

Accepted Answer

A)  People adjust their expectations of inflation rapidly.
B)  People believe policy announcements made by central bank officials.
C)  The short-run Phillips shifts rapidly.
D)  All of the above are correct.E) None of the above
F) A) and D)

Question 19

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Accepted Answer

A)  raised inflation and unemployment.
B)  raised inflation and reduced unemployment.
C)  reduced inflation and raised unemployment.
D)  reduced inflation and unemployment.E) A) and D)
F) B) and C)

Question 20

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Accepted Answer

In the short run, unemployment will rise...

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

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

Correct AnswerverifiedShow Answer

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

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If there is a favorable supply shock which direction does the short-run Phillips curve shift? What initially happens to unemployment and inflation as a result of this shock?

Correct AnswerverifiedThe short-run Philli...View AnswerShow Answer

A favorable supply shock shifts the short-run Phillips curve

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the price level is 110.00 at the end of 2020, 121.00 at the end of 2021, and 128.26 at the end of 2022. Can we accurately describe the period 2021-2022 as a period of disinflation?

Correct AnswerverifiedYes. The rate of inflation for 2021 was ...View AnswerShow Answer

Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by

Correct AnswerverifiedShow Answer

Disinflation is a

Correct AnswerverifiedShow Answer

If inflation expectations decline, then the short-run Phillips curve shifts

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 taxes moves the economy to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

By about 1973, U.S. policymakers had learned that

Correct AnswerverifiedShow Answer

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the growth rate of the money supply, in the long run

Correct AnswerverifiedShow Answer

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

Correct AnswerverifiedIn the short run, unemployment will rise...View AnswerShow 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

Which of the following would tend to shorten recessions associated with anti-inflation policies by central banks?

Correct AnswerverifiedShow Answer

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

Correct AnswerverifiedShow Answer

Which of the following is correct if there is an adverse supply shock?

Correct AnswerverifiedShow Answer

In 1980, the U.S. economy had an inflation rate of

Correct AnswerverifiedShow Answer

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The short-run Philli...
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Yes. The rate of inflation for 2021 was ...
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In the short run, unemployment will rise...
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