Question 1

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 8 percent would require sacrificing how much annual output?

Accepted Answer

A)  2 percent of annual output
B)  6 percent of annual output
C)  8 percent of annual output
D)  10 percent of annual outputE) None of the above
F) A) and C)

Question 2

Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?

Accepted Answer

A)  Prices, output, and employment all rise.
B)  Prices and output rise, and employment falls.
C)  Prices rise, and output and employment fall.
D)  Prices fall, and output and employment rise.E) C) and D)
F) All of the above

Question 3

Proponents of rational expectations theory have argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation,and if rational people understand that commitment and quickly lower their inflation expectation,the sacrifice ratio could be as small as what?

Accepted Answer

A)  0
B)  1
C)  4
D)  5E) All of the above
F) B) and D)

Question 4

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops.What would the good weather do to the short-run aggregate-supply curve and the short-run Phillips curve?

Accepted Answer

A)  It would shift both the short-run aggregate-supply curve and the short-run Phillips curve right.
B)  It would shift both the short-run aggregate-supply curve and the short-run Phillips curve left.
C)  It would shift the short-run aggregate-supply curve to the right, and the short-run Phillips curve to the left.
D)  It would shift the short-run aggregate-supply curve to the left, and the short-run Phillips curve to the right.E) B) and C)
F) None of the above

Question 5

If there is an adverse supply shock,which of the following will most likely happen?

Accepted Answer

A)  The aggregate supply curve and the short-run Phillips curve will both shift right.
B)  The aggregate supply curve and the short-run Phillips curve will both shift left.
C)  The aggregate supply curve will shift right, and the short-run Phillips curve will shift left.
D)  The aggregate supply curve will shift left, and the short-run Phillips curve will shift right.E) B) and D)
F) None of the above

Question 6

Figure 16-2
 
-Refer to the Figure 16-2.Suppose the economy is initially at point c. If the money supply increases, where does the economy move to in the short-run?

Accepted Answer

A)  b
B)  d
C)  e
D)   aE) None of the above
F) B) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Some countries have inflation in excess of 20 percent.Suppose that the sacrifice ratio is 2.5.What is the cost of reducing inflation from 20 percent to 4 percent?

Accepted Answer

The sacrifice ratio gives the annual per...

Question 9

If the short-run Phillips curve were stable,which of the following would be unusual?

Accepted Answer

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 output and an increase in unemploymentE) C) and D)
F) B) and D)

Question 10

Figure 16-3
 
-Refer to the Figure 16-3.Starting from c and 3,in the long run,where does a decrease in money supply growth move the economy to?

Accepted Answer

A)  a and 1
B)  e and 5
C)  d and 4D) A) and B)
E) A) and C)

Question 11

In the long run,what are the effects of a decrease in the rate of growth of the money supply?

Accepted Answer

A)  It will increase inflation and shift the short-run Phillips curve right.
B)  It will increase inflation and shift the short-run Phillips curve left.
C)  It will decrease inflation and shift the short-run Philips curve right.
D)  It will decrease inflation and shift the short-run Phillips curve left.E) B) and D)
F) None of the above

Question 12

Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?

Accepted Answer

The short-run Phillips curve (SRPC)was d...

Question 13

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

Accepted Answer

A)  It will shift the short-run Phillips curve right and raise inflation.
B)  It will shift the short-run Phillips curve right and lower inflation.
C)  It will shift the short-run Phillips curve left and raise inflation.
D)  It will shift the short-run Phillips curve left and lower inflation.E) All of the above
F) A) and B)

Question 14

Use the AD?AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Accepted Answer

With perfect capital mobility,the centra...

Question 15

Which of the following best defines the sacrifice ratio?

Accepted Answer

A)  the sum of the inflation and unemployment rates
B)  the inflation rate divided by the unemployment rate
C)  the number of percentage points annual output falls for each percentage point reduction in inflation
D)  the number of percentage points unemployment rises for each percentage point reduction in inflationE) A) and C)
F) B) and D)

Question 16

Which of the following is an adverse supply shock?

Accepted Answer

A)  a decrease in the money supply
B)  a tax cut
C)  a worldwide drought
D)  decreased government spendingE) A) and B)
F) B) and D)

Question 17

Which of the following did Phillips discover?

Accepted Answer

A)  a positive relation between unemployment and inflation in the United Kingdom
B)  a positive relation between unemployment and inflation in Canada
C)  a negative relation between unemployment and inflation in Canada
D)  a negative relation between unemployment and inflation in the United KingdomE) All of the above
F) None of the above

Question 18

Economists generally agree that there is a short-run Phillips curve.However,some economists believe that the short-run Phillips curve is steep and that inflation expectations adjust quickly so the long run is short-lived.What do such beliefs imply about the benefits of using policy to reduce unemployment? What do such beliefs imply about the costs of using policy to reduce inflation?

Accepted Answer

If the Phillips curve is steep,then an i...

Question 19

How does a decrease in the expected rate of inflation shift the Phillips curves?

Accepted Answer

A)  It shifts both the short-run and long-run Phillips curves to the right.
B)  It shifts both the short-run and long-run Phillips curves to the left.
C)  It shifts only the short-run Phillips curve to the right.
D)  It shifts only the short-run Phillips curve to the left.E) All of the above
F) None of the above

Question 20

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Accepted Answer

A)  0
B)  2
C)  3
D)  4E) None of the above
F) A) and B)

Exam 16: The Short-Run Tradeoff between Inflation and Unemployment

Figure 16-2 -Refer to the Figure 16-2.Suppose the economy is initially at point c. If the money supply increases, where does the economy move to in the short-run?

Correct Answer
verified

Use the AD?AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Correct Answer
verified
With perfect capital mobility,the centra...
View Answer

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

Correct Answer
verified

Which of the following is an adverse supply shock?

Correct Answer
verified

Which of the following did Phillips discover?

Correct Answer
verified

How does a decrease in the expected rate of inflation shift the Phillips curves?

Correct Answer
verified

Some countries have inflation in excess of 20 percent.Suppose that the sacrifice ratio is 2.5.What is the cost of reducing inflation from 20 percent to 4 percent?

Correct Answer
verified
The sacrifice ratio gives the annual per...
View Answer

If there is an adverse supply shock,which of the following will most likely happen?

Correct Answer
verified

In the long run,what are the effects of a decrease in the rate of growth of the money supply?

Correct Answer
verified

Proponents of rational expectations theory have argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation,and if rational people understand that commitment and quickly lower their inflation expectation,the sacrifice ratio could be as small as what?

Correct Answer
verified

Correct Answer
verified
If the Phillips curve is steep,then an i...
View Answer

Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?

Correct Answer
verified

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Correct Answer
verified

If the short-run Phillips curve were stable,which of the following would be unusual?

Correct Answer
verified

Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?

Correct Answer
verified
The short-run Phillips curve (SRPC)was d...
View Answer

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

Correct Answer
verified

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does a decrease in money supply growth move the economy to?

Correct Answer
verified

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops.What would the good weather do to the short-run aggregate-supply curve and the short-run Phillips curve?

Correct Answer
verified

Which of the following best defines the sacrifice ratio?

Correct Answer
verified

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 8 percent would require sacrificing how much annual output?

Correct Answer
verified

Exam 16: The Short-Run Tradeoff between Inflation and Unemployment

Figure 16-2 -Refer to the Figure 16-2.Suppose the economy is initially at point c. If the money supply increases, where does the economy move to in the short-run?

Correct AnswerverifiedShow Answer

Use the AD?AS model and the Phillips curve to analyze the short-run and long-run effects of devaluating the home currency under a fixed exchange rate regime.

Correct AnswerverifiedWith perfect capital mobility,the centra...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an adverse supply shock?

Correct AnswerverifiedShow Answer

Which of the following did Phillips discover?

Correct AnswerverifiedShow Answer

How does a decrease in the expected rate of inflation shift the Phillips curves?

Correct AnswerverifiedShow Answer

Some countries have inflation in excess of 20 percent.Suppose that the sacrifice ratio is 2.5.What is the cost of reducing inflation from 20 percent to 4 percent?

Correct AnswerverifiedThe sacrifice ratio gives the annual per...View AnswerShow Answer

If there is an adverse supply shock,which of the following will most likely happen?

Correct AnswerverifiedShow Answer

In the long run,what are the effects of a decrease in the rate of growth of the money supply?

Correct AnswerverifiedShow Answer

Proponents of rational expectations theory have argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation,and if rational people understand that commitment and quickly lower their inflation expectation,the sacrifice ratio could be as small as what?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the Phillips curve is steep,then an i...View AnswerShow Answer

Suppose that a central bank increases the money supply.According to the Phillips curve,what should happen to prices,output,and employment?

Correct AnswerverifiedShow Answer

Proponents of rational expectations theory have argued that the sacrifice ratio could be as small as what?

Correct AnswerverifiedShow Answer

If the short-run Phillips curve were stable,which of the following would be unusual?

Correct AnswerverifiedShow Answer

Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?

Correct AnswerverifiedThe short-run Phillips curve (SRPC)was d...View AnswerShow Answer

How will a favourable supply shock shift the short-run Phillips curve and how does it change inflation?

Correct AnswerverifiedShow Answer

Figure 16-3 -Refer to the Figure 16-3.Starting from c and 3,in the long run,where does a decrease in money supply growth move the economy to?

Correct AnswerverifiedShow Answer

Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops.What would the good weather do to the short-run aggregate-supply curve and the short-run Phillips curve?

Correct AnswerverifiedShow Answer

Which of the following best defines the sacrifice ratio?

Correct AnswerverifiedShow Answer

If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 8 percent would require sacrificing how much annual output?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
With perfect capital mobility,the centra...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The sacrifice ratio gives the annual per...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If the Phillips curve is steep,then an i...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The short-run Phillips curve (SRPC)was d...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified