Question 1

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Accepted Answer

They are consistent with the long-run Ph...

Question 2

Suppose that businesses become less optimistic about the future. Assuming no change in inflation expectations, how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?

Accepted Answer

The decrease in spending is sh...

Question 3

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Accepted Answer

The answer of Assuming that rational expectations theory does not...

Question 4

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Accepted Answer

Inflation rises and unemployment falls. ...

Question 5

Figure 35-3. The left-hand graph shows a short-run aggregate-supply SRAS)  curve and two aggregate-demand AD)  curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.  
-Refer to Figure 35-3. What is measured along the vertical axis of the left-hand graph?

Accepted Answer

A)   the wage rate
B)   the inflation rate
C)   the price level
D)   the change in output from one year to the nextE) A) and B)
F) B) and C)

Question 6

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) None of the above
F) B) and D)

Question 7

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

Question 8

A change in expected inflation shifts

Accepted Answer

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

Question 9

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6. 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.E) A) and D)
F) A) and C)

Question 10

List three things that shift the short-run Phillips curve to the right.

Accepted Answer

1. An increase in expected inf...

Question 11

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that the money supply decreases. In the short run, this increases prices 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 according to the aggregate demand and aggregate supply model.
D)   the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.E) None of the above
F) A) and C)

Question 13

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve.

Which of the following statements is correct?

Accepted Answer

A)   These points are consistent with the theoretical long-run Phillips curve, but not with the short-run Phillips curve.
B)   These points are consistent with the theoretical short-run Phillips curve, but not with the long-run Phillips curve.
C)   These points are consistent with both the theoretical short-run and long-run Phillips curves.
D)   These points are not consistent with either the theoretical short-run or long-run Phillips curves.E) A) and B)
F) A) and C)

Question 14

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Accepted Answer

A)   1.
B)   2.
C)   3.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 15

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Accepted Answer

A)   maintained a higher money supply growth rate.
B)   maintained a lower money supply growth rate.
C)   a higher minimum wage than country B.
D)   a lower minimum wage than country B.E) C) and D)
F) A) and D)

Question 16

The natural rate of unemployment

Accepted Answer

A)   is constant over time.
B)   varies over time, but can't be changed by the government.
C)   is the socially desirable rate of unemployment.
D)   does not depend on the rate at which the Fed increases the money supply.E) A) and C)
F) All of the above

Question 17

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

Accepted Answer

A)   unemployment rate.
B)   inflation rate.
C)   growth rate of real national income.
D)   All of the above are correct.E) C) and D)
F) A) and C)

Question 18

If efficiency wages became more common,

Accepted Answer

A)   both the long-run Phillips curve and the long-run aggregate supply curve would shift right.
B)   both the long-run Phillips curve and the long-run aggregate supply curve would shift left.
C)   the long-run Phillips curve would shift right, and the long-run aggregate supply curve would shift left.
D)   the long-run Phillips curve would shift left, and the long-run aggregate supply curve would shift right.E) A) and B)
F) C) and D)

Question 19

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Accepted Answer

A)   Unemployment Rate = Natural Rate of Unemployment - aActual Inflation - Expected Inflation) .
B)   Unemployment Rate = Natural Rate of Unemployment - aExpected Inflation - Actual Inflation) .
C)   Unemployment Rate = Expected Rate of Inflation - aActual Inflation - Expected Inflation) .
D)   Unemployment Rate = Actual Rate of Inflation - aActual Unemployment - Expected Unemployment) .E) A) and B)
F) A) and D)

Question 20

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the short­run effects of the Fed's policy.

Accepted Answer

The economy moves al...

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Correct Answer
verified
They are consistent with the long-run Ph...
View Answer

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct Answer
verified
Inflation rises and unemployment falls. ...
View Answer

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Correct Answer
verified

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

Correct Answer
verified

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the shortrun effects of the Fed's policy.

Correct Answer
verified
The economy moves al...
View Answer

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Correct Answer
verified

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Correct Answer
verified

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Correct Answer
verified

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve. Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

Correct Answer
verified

A change in expected inflation shifts

Correct Answer
verified

List three things that shift the short-run Phillips curve to the right.

Correct Answer
verified
1. An increase in expected inf...
View Answer

Suppose that businesses become less optimistic about the future. Assuming no change in inflation expectations, how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?

Correct Answer
verified
The decrease in spending is sh...
View Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Correct Answer
verified

The natural rate of unemployment

Correct Answer
verified

If efficiency wages became more common,

Correct Answer
verified

Exam 17: The Short-Run Tradeoff Between Inflation and Unemployment

The analysis of Friedman and Phelps can be summarized in the following equation where a is a positive number:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Some countries have had relatively high inflation and relatively high unemployment for long periods of time. Is this consistent with the Phillips curve? Defend your answer.

Correct AnswerverifiedThey are consistent with the long-run Ph...View AnswerShow Answer

If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer.

Correct AnswerverifiedInflation rises and unemployment falls. ...View AnswerShow Answer

Assuming that rational expectations theory does not hold, if a central banks attempts to reduce the inflation rate what happens to the unemployment rate in the short-run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the short­run effects of the Fed's policy.

Correct AnswerverifiedThe economy moves al...View AnswerShow Answer

Other things the same, if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Correct AnswerverifiedShow Answer

For many years country A has had a lower unemployment rate than country B. According to the long-run Phillips curve which of the following could explain this? Country A has

Correct AnswerverifiedShow Answer

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

Correct AnswerverifiedShow Answer

An economist working for the Central Bank of Fredonia estimates a Phillips curve for Fredonia and reports the following points on the estimated curve. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg the

Correct AnswerverifiedShow Answer

A change in expected inflation shifts

Correct AnswerverifiedShow Answer

List three things that shift the short-run Phillips curve to the right.

Correct Answerverified1. An increase in expected inf...View AnswerShow Answer

Suppose that businesses become less optimistic about the future. Assuming no change in inflation expectations, how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?

Correct AnswerverifiedThe decrease in spending is sh...View AnswerShow Answer

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6. 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

The natural rate of unemployment

Correct AnswerverifiedShow Answer

If efficiency wages became more common,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
They are consistent with the long-run Ph...
View Answer

Correct Answer
verified
Inflation rises and unemployment falls. ...
View Answer

Correct Answer
verified

Correct Answer
verified

The Fed increases the money supply growth rate. Assuming inflation expectations remain constant, use a Phillips curve diagram to show the shortrun effects of the Fed's policy.

Correct Answer
verified
The economy moves al...
View 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
1. An increase in expected inf...
View Answer

Correct Answer
verified
The decrease in spending is sh...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified