Question 1

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called the

Accepted Answer

A)  ideal rate of unemployment.
B)  natural rate of unemployment.
C)  full rate of unemployment.
D)  mature rate of unemployment.E) A) and B)
F) B) and D)

Question 2

Along a short-run Phillips curve, a higher rate of inflation is associated with a lower unemployment rate.

Accepted Answer

A) True 
 B)False

Question 3

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) A) and B)
F) A) and C)

Question 4

A supply shock is an event that directly alters firms' costs and prices, shifting the economy's aggregate supply and thus the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 5

Reducing aggregate demand to fight inflation will cause higher unemployment.

Accepted Answer

A) True 
 B)False

Question 6

The short-run aggregate supply curve is vertical when inflation is predicted accurately.

Accepted Answer

A) True 
 B)False

Question 7

A movement from an upper point to a lower point on the Phillips curve shows

Accepted Answer

A)  decrease in the inflation and decrease in the unemployment.
B)  increase in the inflation and decrease in the employment.
C)  increase in the inflation and increase in the employment.
D)  decrease in the inflation and increase in the unemployment.E) A) and C)
F) A) and D)

Question 8

Figure 33-1
​ 
-Which of the following is true about the economy depicted in Figure 33-1?

Accepted Answer

A)  Economy is experiencing supply-side inflation.
B)  Policymakers have chosen to fight inflation rather than unemployment.
C)  The increase in aggregate demand has increased prices but not real GDP.
D)  The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.E) A) and B)
F) None of the above

Question 9

Inflation targeting requires monetary policymakers to rely heavily on the Phillips curve.

Accepted Answer

A) True 
 B)False

Question 10

A vertical long-run Phillips curve is a vertical straight line at the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 11

Demand-side inflation differs from supply-side inflation in which of the following ways?

Accepted Answer

A)  Demand-side inflation has higher output; supply-side inflation has lower output.
B)  Demand-side inflation has lower output; supply-side inflation has higher output.
C)  Demand-side inflation is always followed by stagflation; supply-side inflation is always followed by demand-side inflation.
D)  Demand-side inflation has a self-correcting mechanism; supply-side inflation does not.E) B) and C)
F) A) and D)

Question 12

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 13

Some economists argue that there is no such thing as a short-run Phillips curve.Who are these economists and what is their argument?

Accepted Answer

The theory of rational expectations disa...

Question 14

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

Accepted Answer

A)  falling interest rates that shift the aggregate demand curve outward.
B)  falling wage rates that shift the aggregate supply curve outward.
C)  rising wage rates that shift the aggregate supply curve inward.
D)  increases in the price level that shift the aggregate supply curve inward.E) B) and D)
F) A) and D)

Question 15

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

Accepted Answer

A)  have a positive slope.
B)  have a negative slope.
C)  be vertical.
D)  be horizontal.E) None of the above
F) B) and C)

Question 16

If policymakers do nothing in a recessionary gap, the most likely outcome is a

Accepted Answer

A)  drop in the inflation rate and a rise in the unemployment rate.
B)  drop in the inflation rate and a drop in the unemployment rate.
C)  rise in the inflation rate and a drop in the unemployment rate.
D)  rise in the inflation rate and a rise in the unemployment rate.E) A) and D)
F) A) and C)

Question 17

Most economists think that, in the short run, there is

Accepted Answer

A)  a trade-off between inflation and unemployment, but not in the long run.
B)  no trade-off between inflation and unemployment, nor is there one in the long run.
C)  a trade-off between inflation and unemployment, and in the long run also.
D)  no trade-off between inflation and unemployment, but there is one in the long run also.E) All of the above
F) None of the above

Question 18

There is no long-run trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following could trigger supply-side inflation?

Accepted Answer

A)  A decrease in the wage rate for all workers
B)  An increase in raw materials' prices
C)  An increase in the productivity of capital
D)  An increase in the labor forceE) None of the above
F) B) and D)

Question 20

The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increases prices and decreases unemployment.

Accepted Answer

A) True 
 B)False

Exam 33: The Trade-Off Between Inflation and Unemployment

Demand-side inflation differs from supply-side inflation in which of the following ways?

Correct AnswerverifiedShow Answer

A vertical long-run Phillips curve is a vertical straight line at the natural rate of unemployment.

Correct AnswerverifiedShow Answer

There is no long-run trade-off between inflation and unemployment.

Correct AnswerverifiedShow Answer

If workers demand wage compensation in advance of inflation, the economy's aggregate supply curve will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The economy's self-correcting mechanism always tends to push the unemployment rate back toward a specific rate of unemployment called the

Correct AnswerverifiedShow Answer

Inflation targeting requires monetary policymakers to rely heavily on the Phillips curve.

Correct AnswerverifiedShow Answer

The economy's self-correcting mechanism to eliminate a recessionary gap relies on

Correct AnswerverifiedShow Answer

Reducing aggregate demand to fight inflation will cause higher unemployment.

Correct AnswerverifiedShow Answer

Figure 33-1 ​ -Which of the following is true about the economy depicted in Figure 33-1?

Correct AnswerverifiedShow Answer

A movement from an upper point to a lower point on the Phillips curve shows

Correct AnswerverifiedShow Answer

If policymakers do nothing in a recessionary gap, the most likely outcome is a

Correct AnswerverifiedShow Answer

Most economists think that, in the short run, there is

Correct AnswerverifiedShow Answer

The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increases prices and decreases unemployment.

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve is vertical when inflation is predicted accurately.

Correct AnswerverifiedShow Answer

Some economists argue that there is no such thing as a short-run Phillips curve.Who are these economists and what is their argument?

Correct AnswerverifiedThe theory of rational expectations disa...View AnswerShow Answer

Which of the following could trigger supply-side inflation?

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

A supply shock is an event that directly alters firms' costs and prices, shifting the economy's aggregate supply and thus the Phillips curve.

Correct AnswerverifiedShow Answer

Along a short-run Phillips curve, a higher rate of inflation is associated with a lower unemployment rate.

Correct AnswerverifiedShow Answer

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Figure 33-1 -Which of the following is true about the economy depicted in Figure 33-1?

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The theory of rational expectations disa...
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