Question 1

If actual inflation differs from expected inflation, what is the slope of the Phillips curve?

Accepted Answer

A)   It is horizontal in the short and long run.
B)   It is upward sloping in the short run and vertical in the long run.
C)   It is vertical in the short run and upward sloping in the long run.
D)   It is downward sloping in the short run and vertical in the long run.

Question 2

Demand-side inflation is usually accompanied by increasing real GDP, while supply-side inflation is usually accompanied by falling real GDP.

Accepted Answer

A) True 
 B)False

Question 3

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

Accepted Answer

A)   generally accepted by politicians, although few economists accept this proposal.
B)   largely accepted by most economists, although politicians do not agree.
C)   highly debatable, because many do not agree that price stability should be the most important goal.
D)   simply incorrect, and no one accepts this idea anymore.

Question 4

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

Accepted Answer

A)   Contango
B)   Swap
C)   Averaging
D)   Indexing

Question 5

If aggregate demand in the U.S.had grown more slowly than it actually did in 2010, the

Accepted Answer

A)   unemployment rate would have been even lower.
B)   inflation rate would have been even lower.
C)   unemployment rate would have been the same.
D)   economy would have grown faster.

Question 6

In the 1990s, the United States benefited from a series of favorable supply shocks.This caused a(n)

Accepted Answer

A)   increase in inflation and unemployment.
B)   decrease in inflation and unemployment.
C)   increase in inflation and a decrease in unemployment.
D)   decrease in inflation and an increase in unemployment.

Question 7

On the vertical axis, the Phillips curve depicts the

Accepted Answer

A)   the rate of unemployment.
B)   rate of inflation.
C)   rate of growth of nominal GDP.
D)   rate of growth of real GDP.

Question 8

The unemployment rate for the U.S.economy in 2010 averaged about

Accepted Answer

A)   10 percent.
B)   8 percent.
C)   4 percent.
D)   2 percent.

Question 9

If workers and firms forecast inflation accurately,

Accepted Answer

A)   the aggregate supply curve will be vertical.
B)   the real wage will not decline as the price level rises.
C)   workers will not lose from inflation, and firms will not gain.
D)   All of the above are correct.

Question 10

Politicians and economists who are generally conservative tend to believe that

Accepted Answer

A)   the self-correcting mechanism is slow and unpredictable.
B)   the short-run Phillips curve is relatively steep.
C)   the costs of unemployment are high.
D)   expectations in reaction to policy measures are very slow to change.

Question 11

Figure 17-7
 
-In Figure 17-7, the case for restrictive monetary and fiscal policy is strongest at point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.

Question 12

If business fluctuations are from demand-side forces,

Accepted Answer

A)   monetary and fiscal policy will move inversely.
B)   interest rates and budget deficits will move inversely.
C)   unemployment and inflation will move inversely.
D)   unemployment and budget deficits will move inversely.

Question 13

If the short-run Phillips curve has a very steep slope, the

Accepted Answer

A)   structural deficit will grow during inflation.
B)   structural deficit will fall during recession.
C)   inflation costs of reducing unemployment are relatively low.
D)   inflation costs of reducing unemployment are relatively high.

Question 14

The rapid advance in computer technology is one of the reasons given for the shift of the

Accepted Answer

A)   aggregate demand curve outward.
B)   aggregate supply curve inward.
C)   aggregate supply curve outward.
D)   total expenditures curve upward.

Question 15

In 2008-2010, American policy makers decided to risk

Accepted Answer

A)   higher inflation for the sake of decreasing unemployment.
B)   higher unemployment to hold down inflation.
C)   increasing taxes for the sake of reducing the budget deficit.
D)   reducing government spending for the sake of balancing the budget.

Question 16

A non-policy reason for the reduction in the natural rate of unemployment is the

Accepted Answer

A)   expansionary nature of monetary policy.
B)   aging of the U.S.labor force.
C)   decline in interest rates.
D)   growing federal budget surplus.

Question 17

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

Accepted Answer

A)   It is reinforced, and made more applicable for policy.
B)   It is destroyed, and no longer applies for policy.
C)   It is unchanged, although the curve becomes less steep.
D)   It is unchanged, although the curve shifts inward and to the left.

Question 18

Figure 17-7
 
-In Figure 17-7, the case for expansionary monetary policy and fiscal policy is strongest at point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.

Question 19

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the

Accepted Answer

A)   worst recession occurs when output expands most rapidly.
B)   slowest inflation occurs when output expands most rapidly.
C)   slowest economic growth occurs when output grows most rapidly.
D)   most rapid inflation occurs when output expands most rapidly.

Question 20

If AD and AS increase at exactly the same rate, the result will be

Accepted Answer

A)   demand-side inflation.
B)   supply-side inflation.
C)   falling prices.
D)   stable prices.

Exam 34: The Trade-Off between Inflation and Unemployment

If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the

Correct AnswerverifiedShow Answer

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes?

Correct AnswerverifiedShow Answer

Figure 17-7 -In Figure 17-7, the case for restrictive monetary and fiscal policy is strongest at point

Correct AnswerverifiedShow Answer

If actual inflation differs from expected inflation, what is the slope of the Phillips curve?

Correct AnswerverifiedShow Answer

A non-policy reason for the reduction in the natural rate of unemployment is the

Correct AnswerverifiedShow Answer

If aggregate demand in the U.S.had grown more slowly than it actually did in 2010, the

Correct AnswerverifiedShow Answer

If AD and AS increase at exactly the same rate, the result will be

Correct AnswerverifiedShow Answer

If workers and firms forecast inflation accurately,

Correct AnswerverifiedShow Answer

The unemployment rate for the U.S.economy in 2010 averaged about

Correct AnswerverifiedShow Answer

When the aggregate supply curve shifts adversely, what happens to the relationship shown in the Phillips curve?

Correct AnswerverifiedShow Answer

Figure 17-7 -In Figure 17-7, the case for expansionary monetary policy and fiscal policy is strongest at point

Correct AnswerverifiedShow Answer

If business fluctuations are from demand-side forces,

Correct AnswerverifiedShow Answer

In the 1990s, the United States benefited from a series of favorable supply shocks.This caused a(n)

Correct AnswerverifiedShow Answer

In 2008-2010, American policy makers decided to risk

Correct AnswerverifiedShow Answer

The rapid advance in computer technology is one of the reasons given for the shift of the

Correct AnswerverifiedShow Answer

On the vertical axis, the Phillips curve depicts the

Correct AnswerverifiedShow Answer

If the short-run Phillips curve has a very steep slope, the

Correct AnswerverifiedShow Answer

Politicians and economists who are generally conservative tend to believe that

Correct AnswerverifiedShow Answer

The proposition that the Fed should concentrate on price stability rather than reducing unemployment is

Correct AnswerverifiedShow Answer

Demand-side inflation is usually accompanied by increasing real GDP, while supply-side inflation is usually accompanied by falling real GDP.

Correct AnswerverifiedShow Answer

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