MacroEconomics Chapter 22 hmwk quiz

Suppose the central bank decreases the growth rate of the money supply. In the short run, this policy change will affect

a. both the unemployment rate and the inflation rate.

According to the Phillips curve, policymakers could reduce both inflation and unemployment by

d. None of the above is correct.

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

a. True

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

a. True

Short-run outcomes in the economy can be expressed in terms of output and the price level, or in terms of unemployment and inflation.

a. True

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.

a. True

​In a famous article published in 1958, A.W. Phillips used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate.

a. True

Figure 35-2Use 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 the money supply growth rate moves the economy to

b. B and 2

If the central bank increases the money supply, in the short run, output

b. rises so unemployment falls.

Disinflation is a reduction in

b. the inflation rate

To say that the natural rate of unemployment changes over time is to say that

b. the long-run Phillips curve shifts over time.

When aggregate demand shifts left along the short-run aggregate supply curve,

b. unemployment rises and prices fall.

The Economy in 2008In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. Refer to The Economy in 2008. In the short-run the effects of the housing and financial crises

c. reduce the inflation rate and raise the unemployment rate.

Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is

c. vertical, which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run.

Which of the following is an example of an adverse supply shock?

c. a worldwide drought

If the central bank decreases the money supply, then output

c. falls and unemployment rises.

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

c. the inflation rate but not the natural rate of unemployment

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

c. the inflation rate, but not the natural rate of unemployment

As aggregate demand shifts left along the short-run aggregate supply curve,

c. unemployment is higher and inflation is lower.

An economy has a current inflation rate of 7%. If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2, then how much annual output must be sacrificed in the transition?

d. None of the above is correct.