Question 1

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.

Question 2

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Accepted Answer

A)   should not see an increase in the unemployment rate even in the short run.
B)   will having rising unemployment for a while,but then return to the natural rate of unemployment.
C)   will have a permanently higher unemployment rate.
D)   None of the above is suggested by the arguments of Friedman and Phelps.

Question 3

Suppose the Fed increased the growth rate of the money supply.Which of the following would be higher in the long run?

Accepted Answer

A)   both 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 unemployment rate nor the inflation rate

Question 4

In the late 1960's,Milton Friedman and Edmund Phelps argued that a tradeoff between inflation and unemployment

Accepted Answer

A)   existed in the long run and the short run.
B)   existed in the long run but not the short run.
C)   existed in the short run but not the long run.
D)   did not exist.

Question 5

If policymakers accommodate an adverse supply shock,then in the short run the unemployment rate

Accepted Answer

A)   and the inflation rate rise.
B)   and the inflation rate fall.
C)   rises and the inflation rate falls.
D)   falls and the inflation rate rises.

Question 6

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run.Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Accepted Answer

fall.Eventually inflation expe...

Question 7

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

Accepted Answer

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

Question 8

In which case,if any,will inflation remain higher after a temporary adverse supply shock?

Accepted Answer

A)   both when the central bank maintains a higher money supply growth rate and when the central bank does nothing
B)   only if the central bank does nothing
C)   only if the central bank maintains a higher money supply growth rate
D)   None of the above is correct.Whether the central bank maintains a higher money supply growth rate or not,the inflation rate will return to its original level.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

A central bank pledges to reduce the inflation rate from 20% to 5%.People reduce their inflation expectations to 10%,but the central bank only reduces inflation to 15%.What happens to the unemployment rate?

Accepted Answer

The answer of A central bank pledges to reduce the...

Question 12

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 13

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 rate

Question 14

Figure 22-5
Use the graph below to answer the following questions. 
-Refer to Figure 22-5.If the economy starts at C and the money supply growth rate increases,then in the short run the economy moves to

Accepted Answer

A)   B.
B)   D.
C)   F.
D)   None of the above is consistent with an increase in the money supply growth rate.

Question 15

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Accepted Answer

Consider what happens when the aggregate...

Question 16

A favorable supply shock will cause the price level

Accepted Answer

A)   and output to rise.
B)   and output to fall.
C)   to rise and output to fall.
D)   to fall and output to rise.

Question 17

Disinflation would eventually cause

Accepted Answer

A)   the short-run and the long run Phillips curve to shift right.
B)   the short-run and the long run Phillips curve to shift left.
C)   the short-run Phillips curve but not the long run Phillips curve to shift right.
D)   the short-run Phillips curve but not the long run Phillips curve to shift left.

Question 18

Suppose a central bank announced that it was going to make a serious effort to fight inflation.A few years later the inflation rate is lower,but there had been a serious recession.We could conclude with certainty that

Accepted Answer

A)   the rational expectations hypothesis is false.
B)   the rational expectations hypothesis is true.
C)   the policymakers lacked credibility.
D)   None of the above is certain.

Question 19

In most of the 1970s,the Fed's policy created expectations of high inflation.

Accepted Answer

A) True 
 B)False

Question 20

In the late 1960s,Milton Friedman and Edmund Phelps argued that

Accepted Answer

A)   the trade-off between inflation and unemployment did not apply in the long run This claim is consistent with monetary neutrality in the long run.
B)   the trade-off between inflation and unemployment did not apply in the long run.This claim is inconsistent with monetary neutrality in the long run.
C)   the trade-off between inflation and unemployment applied in both the short run and the long run.This claim is consistent with monetary neutrality in the long run.
D)   the trade-off between inflation and unemployment applied in both the short run and the long run.This claim is inconsistent with monetary neutrality in the long run.

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

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

Correct AnswerverifiedShow Answer

Disinflation would eventually cause

Correct AnswerverifiedShow Answer

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A central bank pledges to reduce the inflation rate from 20% to 5%.People reduce their inflation expectations to 10%,but the central bank only reduces inflation to 15%.What happens to the unemployment rate?

Correct AnswerverifiedShow Answer

Suppose a central bank announced that it was going to make a serious effort to fight inflation.A few years later the inflation rate is lower,but there had been a serious recession.We could conclude with certainty that

Correct AnswerverifiedShow Answer

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In which case,if any,will inflation remain higher after a temporary adverse supply shock?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the Fed raised the money supply growth by more than expected then the unemployment rate would _____ in the short run.Explain the process by which the economy moves to the long run if the Fed maintains the higher money supply growth rate.

Correct Answerverifiedfall.Eventually inflation expe...View AnswerShow Answer

A favorable supply shock will cause the price level

Correct AnswerverifiedShow Answer

Figure 22-5 Use the graph below to answer the following questions. -Refer to Figure 22-5.If the economy starts at C and the money supply growth rate increases,then in the short run the economy moves to

Correct AnswerverifiedShow Answer

If policymakers accommodate an adverse supply shock,then in the short run the unemployment rate

Correct AnswerverifiedShow Answer

Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain.

Correct AnswerverifiedConsider what happens when the aggregate...View AnswerShow Answer

In most of the 1970s,the Fed's policy created expectations of high inflation.

Correct AnswerverifiedShow Answer

In the late 1960's,Milton Friedman and Edmund Phelps argued that a tradeoff between inflation and unemployment

Correct AnswerverifiedShow Answer

In the late 1960s,Milton Friedman and Edmund Phelps argued that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the Fed increased the growth rate of the money supply.Which of the following would be higher in the long run?

Correct AnswerverifiedShow 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
fall.Eventually inflation expe...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Consider what happens when the aggregate...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified