Question 1

The tradeoff exhibited by the short-run Phillips curve is

Accepted Answer

A)   higher inflation with higher unemployment.
B)   lower inflation with lower unemployment.
C)   higher unemployment with lower inflation.
D)   changing inflation with constant unemployment.
E)   higher price level with lower real GDP.F) B) and C)
G) C) and D)

Question 2

The long-run Phillips curve shows the relationship between ________ and ________ when the economy is at full employment.

Accepted Answer

A)   the natural inflation rate; the unemployment rate
B)   the unemployment rate; real GDP
C)   potential GDP; the natural unemployment rate
D)   the inflation rate; the unemployment rate
E)   the inflation rate; the nominal interest rateF) None of the above
G) A) and E)

Question 3

In the United States during the 1970s, the unemployment rate rose from previous years, and the inflation rate increased rapidly.This set of events is best described by saying that the

Accepted Answer

A)   economy moved to a lower point on its short-run Phillips curve but the short-run Phillips curve did not shift.
B)   short-run Phillips curve shifted downward.
C)   short-run Phillips curve shifted upward.
D)   economy moved to a higher point on its short-run Phillips curve but the short-run Phillips curve did not shift.
E)   the long-run Phillips curve shifted leftward.F) A) and E)
G) All of the above

Question 4

Suppose potential GDP is $100 billion and the natural unemployment rate is 5 percent.If the unemployment rate is 6 percent, then according to Okun's Law real GDP is

Accepted Answer

A)   $98 billion.
B)   $101 billion.
C)   $99 billion.
D)   $102 billion.
E)   $100 billion.F) A) and E)
G) None of the above

Question 5

Moving upward along the aggregate supply curve, is equivalent to

Accepted Answer

A)   moving downward along the short-run Phillips curve.
B)   moving upward along the short-run Phillips curve.
C)   shifting the short-run Phillips curve rightward.
D)   shifting the short-run Phillips curve leftward.
E)   shifting the short-run Phillips curve upward.F) B) and D)
G) B) and C)

Question 6

Which of the following decreases the natural unemployment rate?

Accepted Answer

A)   many young people entering the labor force
B)   a recession
C)   higher oil prices
D)   rapid technological change that increases the demand for labor
E)   a decrease in aggregate demand so that fewer workers are neededF) A) and D)
G) A) and B)

Question 7

In order to reduce the expected inflation rate at least cost in terms of higher unemployment, the Fed could

Accepted Answer

A)   suddenly reduce the growth rate of the money supply.
B)   appeal to everyone's since of patriotic duty to reduce their wage demands.
C)   announce a credible inflation reduction policy.
D)   make policy according to the short-run Phillips curve tradeoff.
E)   surprise everyone with a slowdown in the inflation rate.F) B) and E)
G) B) and D)

Question 8

According to Okun's law, if the unemployment rate is 7 percent and the natural unemployment rate is 5 percent, potential GDP is ________ than real GDP.

Accepted Answer

A)   2 percent less
B)   4 percent less
C)   7 percent less
D)   2 percent greater
E)   4 percent greaterF) B) and D)
G) D) and E)

Question 9

If aggregate demand decreases, the

Accepted Answer

A)   short-run Phillips curve shifts rightward.
B)   short-run Phillips curve shifts leftward.
C)   economy moves to a higher inflation rate along its short-run Phillips curve.
D)   economy moves to a lower inflation rate along its short-run Phillips curve.
E)   short-run Phillips curve does not shift nor is there a movement along it.F) B) and C)
G) A) and D)

Question 10

An increase in aggregate demand results in

Accepted Answer

A)   a higher unemployment rate and a lower price level.
B)   a lower unemployment rate and a higher price level.
C)   an increase in real GDP and a decrease in the price level.
D)   a decrease in real GDP and a decrease in the price level.
E)   a lower unemployment rate and a lower price level.F) All of the above
G) B) and E)

Question 11

The short-run Phillips curve is

Accepted Answer

A)   vertical at the natural unemployment rate.
B)   upward sloping.
C)   downward sloping.
D)   horizontal at the expected inflation rate.
E)   U-shaped.F) B) and E)
G) B) and C)

Question 12

Burger King is paying $8 an hour to its workers.If the expected inflation rate equals the actual inflation rate and both are 10 percent a year, then to keep the real wage rate constant in a year the money wage rate must

Accepted Answer

A)   rise to $8.80 an hour.
B)   fall to $7.20 an hour.
C)   stay at $8.00 an hour.
D)   rise to $8.10 an hour.
E)   rise to $8.40 an hour.F) C) and E)
G) A) and D)

Question 13

Along the short-run Phillips curve SRPC₀ the natural unemployment rate is

Accepted Answer

A)   3 percent.
B)   6 percent.
C)   7 percent.
D)   an amount that can be determined from the figure, but none of the above answers are correct.
E)   an amount that cannot be determined from the figure.F) B) and D)
G) B) and C)

Question 14

A country reports potential GDP of $10.0 trillion and a natural unemployment rate of 5 percent.Based on these data, use Okun's law to complete the table below.
 $\begin{array}{cc}
\begin{array}{c}
\text { Unemployment rate } \
\text { (percentage) }
\end{array} & \begin{array}{c}
\text { RealGDP } \
\text { (billions of } \
\text { 2005 dollars) }
\end{array} \
\hline 3 & - \
4 & - \
5 & - \
6 &- \
7 &-
\end{array}$

Accepted Answer

\[\begin{array} { c c }
\begin{array} {...

Question 15

What is the natural rate hypothesis?

Accepted Answer

The natural rate hypothesis is the propo...

Question 16

The inflation rate that is used to set the money wage rate and other money prices is the

Accepted Answer

A)   natural inflation rate.
B)   actual inflation rate.
C)   expected inflation rate.
D)   cost of living inflation rate.
E)   wage inflation rate.F) C) and D)
G) A) and B)

Question 17

-The shifts of the short-run and long-run Phillips curves in the figure above are the result of

Accepted Answer

A)   an increase in the natural unemployment rate.
B)   a decrease in the natural unemployment rate.
C)   an increase in the expected inflation rate.
D)   a decrease in the expected inflation rate.
E)   an increase in the actual inflation rate.F) All of the above
G) A) and E)

Question 18

The baby boomers born in the 1940s and 1950s began entering the work force in the 1960s and 1970s .This demographic event ________ the natural unemployment rate, thereby shifting the short-run Phillips curve ________ and shifting the long-run Phillips curve ________.

Accepted Answer

A)   increased; rightward; rightward
B)   decreased; leftward; leftward
C)   increased; rightward; leftward
D)   increased; leftward; rightward
E)   decreased; rightward; rightwardF) None of the above
G) A) and C)

Question 19

-The curve shown in the figure above is the

Accepted Answer

A)   aggregate demand curve.
B)   aggregate supply curve.
C)   demand for money curve.
D)   Phillips curve.
E)   potential GDP curve.F) A) and D)
G) All of the above

Question 20

If a country faces a high unemployment rate, a possible method to lower the unemployment rate in the short run is a

Accepted Answer

A)   surprise increase in the inflation rate.
B)   surprise decrease of government spending.
C)   credible decrease in the inflation rate.
D)   credible decrease in the money supply.
E)   credible increase in the inflation rate.F) A) and D)
G) D) and E)

Exam 15: The Short-Run Policy Tradeoff

-The curve shown in the figure above is the

Correct Answer
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Correct Answer
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\begin{array} {...
View Answer

The short-run Phillips curve is

Correct Answer
verified

What is the natural rate hypothesis?

Correct Answer
verified
The natural rate hypothesis is the propo...
View Answer

The inflation rate that is used to set the money wage rate and other money prices is the

Correct Answer
verified

The tradeoff exhibited by the short-run Phillips curve is

Correct Answer
verified

In the United States during the 1970s, the unemployment rate rose from previous years, and the inflation rate increased rapidly.This set of events is best described by saying that the

Correct Answer
verified

If aggregate demand decreases, the

Correct Answer
verified

The baby boomers born in the 1940s and 1950s began entering the work force in the 1960s and 1970s .This demographic event the natural unemployment rate, thereby shifting the short-run Phillips curve and shifting the long-run Phillips curve .

Correct Answer
verified

Suppose potential GDP is $100 billion and the natural unemployment rate is 5 percent.If the unemployment rate is 6 percent, then according to Okun's Law real GDP is

Correct Answer
verified

If a country faces a high unemployment rate, a possible method to lower the unemployment rate in the short run is a

Correct Answer
verified

Which of the following decreases the natural unemployment rate?

Correct Answer
verified

Moving upward along the aggregate supply curve, is equivalent to

Correct Answer
verified

-The shifts of the short-run and long-run Phillips curves in the figure above are the result of

Correct Answer
verified

In order to reduce the expected inflation rate at least cost in terms of higher unemployment, the Fed could

Correct Answer
verified

An increase in aggregate demand results in

Correct Answer
verified

Along the short-run Phillips curve SRPC₀ the natural unemployment rate is

Correct Answer
verified

According to Okun's law, if the unemployment rate is 7 percent and the natural unemployment rate is 5 percent, potential GDP is ________ than real GDP.

Correct Answer
verified

The long-run Phillips curve shows the relationship between and when the economy is at full employment.

Correct Answer
verified

Burger King is paying $8 an hour to its workers.If the expected inflation rate equals the actual inflation rate and both are 10 percent a year, then to keep the real wage rate constant in a year the money wage rate must

Correct Answer
verified

Exam 15: The Short-Run Policy Tradeoff

-The curve shown in the figure above is the

Correct AnswerverifiedShow Answer

Correct Answerverified\[\begin{array} { c c } \begin{array} {...View AnswerShow Answer

The short-run Phillips curve is

Correct AnswerverifiedShow Answer

What is the natural rate hypothesis?

Correct AnswerverifiedThe natural rate hypothesis is the propo...View AnswerShow Answer

The inflation rate that is used to set the money wage rate and other money prices is the

Correct AnswerverifiedShow Answer

The tradeoff exhibited by the short-run Phillips curve is

Correct AnswerverifiedShow Answer

In the United States during the 1970s, the unemployment rate rose from previous years, and the inflation rate increased rapidly.This set of events is best described by saying that the

Correct AnswerverifiedShow Answer

If aggregate demand decreases, the

Correct AnswerverifiedShow Answer

The baby boomers born in the 1940s and 1950s began entering the work force in the 1960s and 1970s .This demographic event ________ the natural unemployment rate, thereby shifting the short-run Phillips curve ________ and shifting the long-run Phillips curve ________.

Correct AnswerverifiedShow Answer

Suppose potential GDP is $100 billion and the natural unemployment rate is 5 percent.If the unemployment rate is 6 percent, then according to Okun's Law real GDP is

Correct AnswerverifiedShow Answer

If a country faces a high unemployment rate, a possible method to lower the unemployment rate in the short run is a

Correct AnswerverifiedShow Answer

Which of the following decreases the natural unemployment rate?

Correct AnswerverifiedShow Answer

Moving upward along the aggregate supply curve, is equivalent to

Correct AnswerverifiedShow Answer

-The shifts of the short-run and long-run Phillips curves in the figure above are the result of

Correct AnswerverifiedShow Answer

In order to reduce the expected inflation rate at least cost in terms of higher unemployment, the Fed could

Correct AnswerverifiedShow Answer

An increase in aggregate demand results in

Correct AnswerverifiedShow Answer

Along the short-run Phillips curve SRPC₀ the natural unemployment rate is

Correct AnswerverifiedShow Answer

According to Okun's law, if the unemployment rate is 7 percent and the natural unemployment rate is 5 percent, potential GDP is ________ than real GDP.

Correct AnswerverifiedShow Answer

The long-run Phillips curve shows the relationship between ________ and ________ when the economy is at full employment.

Correct AnswerverifiedShow Answer

Burger King is paying $8 an hour to its workers.If the expected inflation rate equals the actual inflation rate and both are 10 percent a year, then to keep the real wage rate constant in a year the money wage rate must

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
\[\begin{array} { c c }
\begin{array} {...
View Answer

Correct Answer
verified

Correct Answer
verified
The natural rate hypothesis is the propo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The baby boomers born in the 1940s and 1950s began entering the work force in the 1960s and 1970s .This demographic event the natural unemployment rate, thereby shifting the short-run Phillips curve and shifting the long-run Phillips curve .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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The long-run Phillips curve shows the relationship between and when the economy is at full employment.

Correct Answer
verified

Correct Answer
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