Question 1

Figure 33-8

In Figure 33-8, which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

Accepted Answer

A)   A to B to C
B)   B to C to E
C)   C to B to A
D)   D to C to EE) A) and B)
F) A) and C)

Question 2

If the short-run Phillips curve has a very flat slope, the

Accepted Answer

A)   structural deficit will grow during inflation.
B)   structural deficit will fall during recession.
C)   inflation costs of reducing unemployment are relatively low.
D)   inflation costs of reducing unemployment are relatively high.E) A) and C)
F) B) and C)

Question 3

If aggregate demand had grown faster than it did from 2009 to 2010, then the U.S. economy would have experienced

Accepted Answer

A)   higher unemployment and higher inflation.
B)   lower unemployment and lower inflation.
C)   higher unemployment and lower inflation.
D)   lower unemployment and higher inflation.E) A) and C)
F) C) and D)

Question 4

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Accepted Answer

A)   operating near full employment.
B)   on the horizontal part of the aggregate supply curve.
C)   operating with high unemployment.
D)   operating with substantial excess capacity.E) None of the above
F) C) and D)

Question 5

Figure 33-5

Over a five-year period, economists observed that the unemployment-inflation relationship appeared as in Figure 33-5. Economic theory would conclude that the period

Accepted Answer

A)   was dominated by supply shocks such as increased energy and food costs.
B)   was affected by both supply and demand shocks, with demand shocks dominating.
C)   was dominated by demand-side changes.
D)   cannot be explained because the relationship is the opposite of what the Phillips curve would predict.E) All of the above
F) None of the above

Question 6

Figure 33-2

Given the situation in graph (1)  in Figure 33-2, what action could be expected from the economy's self-correcting mechanism?

Accepted Answer

A)   An increase in aggregate demand
B)   A decrease in aggregate demand
C)   An increase in aggregate supply
D)   A decrease in aggregate supplyE) C) and D)
F) B) and D)

Question 7

If workers underestimate inflation, the aggregate supply curve will tend to be

Accepted Answer

A)   upward sloping.
B)   downward sloping.
C)   vertical.
D)   horizontal.E) C) and D)
F) A) and D)

Question 8

In the long run, the unemployment rate is independent of inflation, and the Phillips curve is vertical at the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 9

Restricting demand will lower inflation but

Accepted Answer

A)   aggravate the unemployment problem.
B)   reduce the unemployment rate.
C)   have no impact on the unemployment rate.
D)   None of the above is correct.E) C) and D)
F) B) and D)

Question 10

The main reason why the economy's aggregate supply curve slopes upward is that

Accepted Answer

A)   as the price level rises, businesses incur additional costs.
B)   businesses typically purchase labor and other inputs under long-term contracts that fix the cost of the input in money terms.
C)   as the price level rises, workers have higher real wages to spend for additional consumer goods.
D)   All of these responses are correct.E) B) and C)
F) C) and D)

Question 11

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well. How does economic theory explain this apparent violation of the Phillips curve model?

Accepted Answer

Just as the stagflation of the 1970s and...

Question 12

Figure 33-8

In Figure 33-8, the aggregate supply curve is shifting inward as we move from

Accepted Answer

A)   A to C.
B)   C to E.
C)   A to B.
D)   D to C.E) A) and D)
F) A) and C)

Question 13

The short-run relationship between inflation and unemployment is often called as the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 14

Economist A. W. Phillips found a negative correlation between wage inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 15

Empirical research suggests that the steepness of the aggregate supply curve depends on the

Accepted Answer

A)   size of the multiplier.
B)   interest rate.
C)   level of wage rate.
D)   amount of excess capacity in the economy.E) All of the above
F) A) and D)

Question 16

Figure 33-6

If the economy in 34-6 (b)  is experiencing an inflationary gap (point g) , the economy's self-correcting process will move unemployment to ____ and inflation to ____.

Accepted Answer

A)   4 percent; 6 percent
B)   5.5 percent; 5 percent
C)   5.5 percent; 7 percent
D)   5.5 percent; 2 percentE) A) and B)
F) B) and C)

Question 17

When deciding on an appropriate course of action to counter a recessionary gap, which of the following do policymakers consider?

Accepted Answer

A)   The slope of the short-run Phillips curve
B)   The costs of inflation and unemployment
C)   The efficiency of the economy's self-correcting mechanism
D)   All of these responses are correct.E) C) and D)
F) B) and D)

Question 18

In the 1970s, why did the short-run Phillips curve fail to depict the unemployment-inflation trade-off?

Accepted Answer

The 1970s were affected by the twin OPEC...

Question 19

Which of the following is most likely to result in unemployment?

Accepted Answer

A)   Aggregate demand grows more rapidly than aggregate supply.
B)   Aggregate demand and aggregate supply grow at the same rate.
C)   Aggregate supply grows more rapidly than aggregate demand.
D)   Neither aggregate demand nor aggregate supply grows at all.E) B) and D)
F) B) and C)

Question 20

Stimulating demand will improve the unemployment picture but

Accepted Answer

A)   worsen inflation.
B)   decrease inflation.
C)   have no impact on inflation.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Exam 33: The Trade-Off Between Inflation and Unemployment

Figure 33-2 Given the situation in graph (1) in Figure 33-2, what action could be expected from the economy's self-correcting mechanism?

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Restricting demand will lower inflation but

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Figure 33-8 In Figure 33-8, the aggregate supply curve is shifting inward as we move from

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Figure 33-8 In Figure 33-8, which of the following points illustrate the expansionary monetary policies of the mid-1990s and the accompanying favorable supply shocks?

Correct AnswerverifiedShow Answer

The short-run relationship between inflation and unemployment is often called as the Phillips curve.

Correct AnswerverifiedShow Answer

In the 1970s, why did the short-run Phillips curve fail to depict the unemployment-inflation trade-off?

Correct AnswerverifiedThe 1970s were affected by the twin OPEC...View AnswerShow Answer

Which of the following is most likely to result in unemployment?

Correct AnswerverifiedShow Answer

Figure 33-6 If the economy in 34-6 (b) is experiencing an inflationary gap (point g) , the economy's self-correcting process will move unemployment to ____ and inflation to ____.

Correct AnswerverifiedShow Answer

An increase in aggregate demand is most likely to cause an increase in the price level when the economy is

Correct AnswerverifiedShow Answer

If the short-run Phillips curve has a very flat slope, the

Correct AnswerverifiedShow Answer

In the long run, the unemployment rate is independent of inflation, and the Phillips curve is vertical at the natural rate of unemployment.

Correct AnswerverifiedShow Answer

Figure 33-5 Over a five-year period, economists observed that the unemployment-inflation relationship appeared as in Figure 33-5. Economic theory would conclude that the period

Correct AnswerverifiedShow Answer

If aggregate demand had grown faster than it did from 2009 to 2010, then the U.S. economy would have experienced

Correct AnswerverifiedShow Answer

When deciding on an appropriate course of action to counter a recessionary gap, which of the following do policymakers consider?

Correct AnswerverifiedShow Answer

Empirical research suggests that the steepness of the aggregate supply curve depends on the

Correct AnswerverifiedShow Answer

The main reason why the economy's aggregate supply curve slopes upward is that

Correct AnswerverifiedShow Answer

Stimulating demand will improve the unemployment picture but

Correct AnswerverifiedShow Answer

Economist A. W. Phillips found a negative correlation between wage inflation and unemployment.

Correct AnswerverifiedShow Answer

The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well. How does economic theory explain this apparent violation of the Phillips curve model?

Correct AnswerverifiedJust as the stagflation of the 1970s and...View AnswerShow Answer

If workers underestimate inflation, the aggregate supply curve will tend to be

Correct AnswerverifiedShow Answer

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The 1970s were affected by the twin OPEC...
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Figure 33-6 If the economy in 34-6 (b) is experiencing an inflationary gap (point g) , the economy's self-correcting process will move unemployment to and inflation to .

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Just as the stagflation of the 1970s and...
View Answer

Correct Answer
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