Chapter 17 - macro

3. The short-run relationship between inflation and unemployment is often called a. the Classical Dichotomy. b. Money Neutrality. c. the Phillips curve. d. None of the above is correct.

C

18. On a given short-run Phillips curve which of the following is held constant? a. the level of GDP b. the unemployment rate c. expected inflation d. employment

C

19. An increase in expected inflation shifts the a. short-run Phillips curve right. b. short-run Phillips curve left. c. long-run Phillips curve right. d. long-run Phillips curve left.

A

20. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher in the short run than before. b. left, so that at any inflation rate unemployment is higher in the short run than before. c. right, so that at any inflation rate unemployment is lower in the short run than before. d. left, so that at any inflation rate unemployment is lower in the short run than before.

A

21. If inflation expectations decline, then the short-run Phillips curve shifts a. left, so that at any inflation rate unemployment is lower in the short run than before. b. right, so that at any inflation rate unemployment is lower in the short run than before. c. right, so that at any inflation rate unemployment is higher in the short run than before. d. left, so that at any inflation rate unemployment is higher in the short run than before.

A

30. In the early 1970s, the short-run Phillips curve shifted a. right as inflation expectations rose. b. right as inflation expectations fell. c. left as inflation expectations rose. d. left as inflation expectations fell.

A

4. According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they a. decreased the money supply. b. increased government expenditures. c. decreased taxes. d. None of the above is correct.

A

5. When aggregate demand shifts right along the short-run aggregate supply curve, unemployment a. falls, so there are upward pressures on wages and prices. b. falls, so there are downward pressures on wages and prices. c. rises, so there are upward pressures on wages and prices. d. rises, so there are downward pressures on wages and prices.

A

6. If policymakers decrease aggregate demand, then in the short run the price level a. falls and unemployment rises. b. and unemployment fall. c. and unemployment rise. d. rises and unemployment falls.

A

13. From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short- run Phillips curve this policy should have a. raised inflation and unemployment. b. raised inflation and reduced unemployment. c. reduced inflation and raised unemployment. d. reduced inflation and unemployment.

B

15. According to the long-run Phillips curve, in the long run monetary policy influences a. both the inflation rate and the unemployment rate. b. the inflation rate but not the unemployment rate. c. the unemployment rate but not the inflation rate. d. neither the unemployment rate nor the inflation rate.

B

23. According to Friedman and Phelps, policymakers face a tradeoff between inflation and unemployment a. only in the long run. b. only in the short run. c. in neither the long run nor short run. d. in both the short run and long run.

B

24. A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to a. both higher inflation and higher unemployment in the long run. b. higher inflation and no change in unemployment in the long run. c. the same inflation rate and lower unemployment in the long run. d. higher inflation and lower unemployment in the long run

B

7. If the short-run Phillips curve were stable, which of the following would be unusual? a. an increase in government spending and a fall in unemployment b. an increase in inflation and a decrease in output c. a decrease in the inflation rate and a rise in the unemployment rate d. a decrease in the money supply and a rise in the unemployment rate.

B

1. In the short run, a. unemployment and inflation are positively related. In the long run they are largely unrelated problems. b. and in the long run inflation and unemployment are positively related. c. unemployment and inflation are negatively related. In the long run they are largely unrelated problems. d. and in the long run inflation and unemployment are negatively related.

C

14. In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose. a. The change in inflation, but not the change in unemployment is consistent with what a given short- run Phillips curve implies. b. The change in unemployment, but not the change in inflation is consistent with what a given short- run Phillips curve implies. c. Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies. d. Neither the change in inflation nor the change in unemployment are consistent with what a given short-run Phillips curve implies.

C

2. In the long run, inflation a. and unemployment are primarily determined by labor market factors. b. and unemployment are primarily determined by the rate of money supply growth. c. is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors. d. is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.

C

22. Friedman and Phelps argued that a. if peoples' inflation expectations were fixed, then an increase in the money supply growth rate could not change output in the short or long run. b. if peoples' inflation expectations were fixed, then a decrease in the money supply growth rate could raise output and unemployment in the short run. c. any change in unemployment created by making aggregate demand increase more rapidly is temporary because people eventually revise their inflation expectations. d. None of the above is correct.

C

25. Suppose expected inflation and actual inflation are both low, and unemployment is at its natural rate. If the Fed then pursues an expansionary monetary policy, which of the following results would be expected in the short run? a. The short-run Phillips curve would shift to the left. b. The short-run Phillips curve would shift to the right. c. The economy would move up and to the left along a given short-run Phillips curve. d. The economy would move down and to the right along a given short-run Phillips curve.

C

27. Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run? 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

C

29. The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument a. is completely correct. b. is completely wrong. c. is true for the short run but not the long run. d. is true for the long run but not the short run.

C

8. Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve? a. Louise reads in the newspaper that the central bank recently raised the money supply. b. Eric gets fewer job offers c. Jack makes larger increases in the prices at his health food store. d. Maria's nominal wage increase is larger.

C

26. In the long run, a decrease in the money supply growth rate 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.

D

28. Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run a. the natural rate of unemployment rises. b. the natural rate of unemployment falls. c. the unemployment rate will be above its natural rate. d. the unemployment rate will be below its natural rate.

D