Macrochapter17

2. Which one of the following is illustrated by the original Phillips curve? a. the tradeoff between inflation and unemployment b. the positive relationship between inflation and unemployment c. the tradeoff between output and unemployment d. the positive relationship between output and unemployment

A

5. Suppose that, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price level. Which one of the following describes the resultant long-run Phillips curve? a. It is vertical. b. It is negatively sloped. c. It is positively sloped. d. It has a slope that is determined by how fast people adjust their price expectations.

A

7. Which one of the following describes outcomes of an increase in expected inflation? a. The short-run Phillips curve shifts to the right, and the unemployment-inflation tradeoff becomes less favourable. b. The short-run Phillips curve shifts to the left, and the unemployment-inflation tradeoff becomes more favourable. c. The short-run Phillips curve shifts to the right, and the unemployment-inflation tradeoff becomes more favourable. d. The short-run Phillips curve shifts to the left, and the unemployment-inflation tradeoff becomes less favourable.

A

1. Which one of the following defines the misery index? a. It is the sum of the growth rate of output and the inflation rate. b. It is the sum of the unemployment rate and the inflation rate. c. It is the sum of the unemployment rate and the bank rate. d. It is the sum of the natural rate of unemployment and the actual rate of unemployment.

B

16. Suppose the economy is operating in long-run equilibrium at point E. Which one of the following is the direction that the economy will move during an unexpected monetary contraction? a. in the direction of point C b. in the direction of point F c. in the direction of point G d. in the direction of point I https://photos.app.goo.gl/XBdetEaJSTkqm1U19

B

6. Suppose that, in the short run, policymakers choose an expansionary fiscal or monetary policy to lower the rate of unemployment. According to the Phillips curve, which one of the following will occur? a. The economy will experience a decrease in inflation. b. The economy will experience an increase in inflation. c. Inflation will be unaffected if price expectations are unchanging.

B

9. Which one of the following occurs if actual inflation exceeds expected inflation? a. Unemployment is greater than the natural rate of unemployment. b. Unemployment is less than the natural rate of unemployment. c. Unemployment is equal to the natural rate of unemployment. d. In the future, people will reduce their expectations of inflation.

B

10. Which one of the following describes outcomes of a decrease in the price of imported oil? a. The short-run Phillips curve shifts to the right, and the unemployment-inflation tradeoff becomes more favourable. b. The short-run Phillips curve shifts to the right, and the unemployment-inflation tradeoff becomes less favourable. c. The short-run Phillips curve shifts to the left, and the unemployment-inflation tradeoff becomes more favourable. d. The short-run Phillips curve shifts to the left, and the unemployment-inflation tradeoff becomes less favourable.

C

12. Suppose that people in the economy expect inflation to be 3 percent and inflation is actually 3 percent. According to the above graph, at which point is the economy operating? a. F b. G c. H d. I https://photos.app.goo.gl/XBdetEaJSTkqm1U19

C

13. Suppose people in the economy expect inflation to be 6 percent, but inflation turns out to be 3 percent. According to the above graph, at which point is the economy operating? a. D b. E c. F d. H https://photos.app.goo.gl/XBdetEaJSTkqm1U19

C

17. Suppose the economy is operating in long-run equilibrium at point E. A monetary contraction occurs. According to the above graph, which one of the following is the direction the economy should move in the long run? a. in the direction of point F b. in the direction of point G c. in the direction of point H d. in the direction of point I https://photos.app.goo.gl/XBdetEaJSTkqm1U19

C

20. Which one of the following would be the long-term result if the Bank of Canada were to continuously use expansionary monetary policy in an attempt to hold unemployment below the natural rate? a. an increase in the level of output b. a decrease in the unemployment rate c. an increase in the rate of inflation d. a decrease in the rate of inflation

C

4. Which of the following will be seen along a short-run Phillips curve? a. a higher rate of growth in output, associated with a lower inflation rate b. a higher rate of growth in output, associated with a higher unemployment rate c. a higher rate of inflation, associated with a lower unemployment rate d. a higher rate of inflation, associated with a higher unemployment rate

C

14. Suppose the economy is in long-run equilibrium at point E. A sudden increase in government spending occurs. According to the above graph, which one of the following is the direction that the economy should move? a. in the direction of point A b. in the direction of point B c. in the direction of point C d. in the direction of point D https://photos.app.goo.gl/XBdetEaJSTkqm1U19

D

15. Suppose the economy is operating at point D in the above graph. Which one of the following describes what will occur as people revise their inflation expectations? a. The long-run Phillips curve will shift to the left. b. The short-run Phillips curve will shift in the direction of the short-run Phillips curve for expected inflation of 3 percent. c. The short-run Phillips curve will shift in the direction of the short-run Phillips curve for expected inflation of 6 percent. d. The short-run Phillips curve will shift in the direction of the short-run Phillips curve for expected inflation of 9 percent. https://photos.app.goo.gl/XBdetEaJSTkqm1U19

D

3. Which one of the following explains why the Phillips curve is an extension of the model of aggregate supply and aggregate demand? a. In the short run, an increase in aggregate demand increases the price level and decreases growth. b. In the short run, an increase in aggregate demand increases the price level and decreases inflation. c. In the short run, an increase in aggregate demand increases the price level and increases unemployment. d. In the short run, an increase in aggregate demand increases the price level and decreases unemployment.

D

8. Which one of the following would shift the long-run Phillips curve to the left? a. a decrease in the price of imported oil b. a decrease in expected inflation c. a decrease in aggregate demand d. a reduction in Employment Insurance benefits

D

18. If people have rational expectations, which one of the following could occur after a credible monetary policy contraction is announced? a. The announcement could reduce inflation with little or no increase in unemployment. b. The announcement could increase inflation with little or no decrease in unemployment. c. The announcement could increase inflation, but it would decrease unemployment by an unusually large amount. d. The announcement could reduce inflation, but it would increase unemployment by an unusually large amount.

A

19. If the sacrifice ratio is 3, which one of the following is required to reduce inflation from 5 percent to 2 percent? a. a reduction in output of 3 percent b. a reduction in output of 6 percent c. a reduction in output of 9 percent d. a reduction in output of 15 percent

C

11. Which one of the following describes the argument of the natural-rate hypothesis? a. Unemployment is always above the natural rate. b. Unemployment is always below the natural rate. c. Unemployment is always equal to the natural rate. d. In the long run, the unemployment rate returns to the natural rate, regardless of inflation.

D