Macroeconomics Help 2 Chapter 34
How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?
It would shift the long-run Phillips curve left
How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?
It would shift the long-run Phillips curve left.
If net exports fall $40 billion and the MPC is 8/11 and there is a multiplier effect, but no crowding out effect, then
aggregate demand falls by 11/3 x $40 billion
A tax increase has
both a crowding out and multiplier effect
Monetary policy
can be implemented quickly, but most of its impact on aggregate demand occurs months after policy is implemented
The natural rate of unemployment
does not depend on the rate at which the Fed increases the money supply
Suppose that the central bank unexpectedly increases the growth rate of the money supply. In the short run the effects of this are shown by
moving to the left along the short-run Phillips curve
If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs, then which of the following curves would shift right?
the long-run aggregate supply curve but not the long-run Phillips curve
The long-run Phillips curve would shift left if
the minimum wage was reduced but not if the money supply increased
According to the Phillips curve, unemployment and inflation are negatively related in
the short run, but not in the long run
Which of the following correctly explains the crowding-out effect?
An increase in government expenditures increases the interest rate and so reduces investment spending.
Refer to Figure 4-1. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to
B and 2.
Suppose expected inflation and actual inflation are both relatively high, and unemployment is at its natural rate. If the Fed then pursues a contractionary monetary policy, which of the following results would be expected in the short run?
Expected inflation would exceed actual inflation, and unemployment would exceed its natural rate
A favorable supply shock causes the price level to
fall. To counter this a central bank would increase the money supply
If policymakers decrease aggregate demand, then in the short run the price level
falls and unemployment rises
Permanent tax cuts shift the AD curve
farther to the right than do temporary tax cuts
If inflation is less than expected, then the unemployment rate is
greater than the natural rate. In the long run the short-run Phillips curve will shift left.
If the Federal Reserve increases the rate at which it increases the money supply, then unemployment is lower
in the short run but not the long run
To reduce the effects of crowding out caused by an increase in government expenditures, the Federal Reserve could
increase the money supply by buying bonds.
In the long run, an increase in the money supply growth rate
increases inflation and shifts the short-run Phillips curve right
Suppose the Federal Reserve pursues contractionary monetary policy. In the long run
inflation is lower and unemployment is the same as it was prior to the change in policy.
According to the short-run Phillips curve, if the central bank increases the money supply, then
inflation will rise and unemployment will fall
In the long run, inflation
is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors.
A reduction in U.S net exports would shift U.S. aggregate demand
leftward. In an attempt to stabilize the economy, the government could cut taxes
Other things the same, automatic stabilizers tend to
raise expenditures during recessions and lower expenditures during expansions
In the long run, an increase in the money supply
raises prices and leaves unemployment unchanged
If policymakers increase aggregate demand, then in the short run the price level
rises and unemployment falls
In the long run, fiscal policy influences
saving, investment, and growth; in the short run, fiscal policy primarily influences the aggregate demand for goods and services
Which of the following tends to make the size of a shift in aggregate demand resulting from a tax cut smaller than it otherwise would be
the crowding-out effect
Assume there is a multiplier effect and some crowding out effect. An increase in government expenditures changes aggregate demand more,
the larger the MPC and the weaker the influence of income on money demand
If the Fed increases the growth rate of the money supply, in the long run which of the following is unchanged?
the unemployment rate but not inflation
As the aggregate demand curve shifts leftward along a given aggregate supply curve
unemployment is higher and inflation is lower
When aggregate demand shifts left along the short-run aggregate supply curve,
unemployment rises and prices fall
Phillips found a negative relation between
wage inflation and unemployment.
