Question 1

Define the following terms and explain their importance to the study of macroeconomics: 
a. Phillips curve 
b. rational expectations 
c. indexing 
d. stagflation

Accepted Answer

a. A Phillips curve is a graph depicting...

Question 2

If the aggregate supply curve shifts outward, then unemployment

Accepted Answer

A)   and inflation will both decrease.
B)   and inflation will both increase.
C)   will increase and inflation will decrease.
D)   will decrease and inflation will increase.E) A) and D)
F) B) and C)

Question 3

Figure 33-3

Given the situation in graph (1)  in Figure 33-3, what can be expected to change in graph (1)  when the economy's self-correcting mechanism operates?

Accepted Answer

A)   Aggregate demand increases.
B)   Aggregate demand decreases.
C)   Aggregate supply increases.
D)   Aggregate supply decreases.E) B) and C)
F) A) and D)

Question 4

Many economists think that, in the long run, the Phillips curve is

Accepted Answer

A)   a horizontal line.
B)   a vertical line.
C)   the same as the short-run curve.
D)   a 45-degree line from the origin.E) A) and D)
F) A) and C)

Question 5

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

Accepted Answer

First, long-term contracts may be based ...

Question 6

A study of the U.S. price level and real GDP from 1972 to 2007 reveals a clear upward march toward higher prices and greater output. What explains this?

Accepted Answer

A)   Both the aggregate demand curve and the aggregate supply curve have shifted to the left year after year.
B)   Both the aggregate demand curve and the aggregate supply curve have shifted to the right year after year.
C)   The aggregate supply curve has shifted to the right, while the aggregate demand curve has shifted to the left.
D)   The aggregate supply curve has shifted to the left, while the aggregate demand curve has shifted to the right.E) A) and B)
F) A) and C)

Question 7

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) None of the above

Question 8

The theory of rational expectations says that

Accepted Answer

A)   workers make excellent choices of places to work.
B)   workers make the best possible forecasts of inflation.
C)   economists make rational expectations of inflation.
D)   economists expect workers to be rational.E) A) and D)
F) A) and B)

Question 9

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

Accepted Answer

A)   rational expectations
B)   irrational expectations
C)   no expectations
D)   None of the above is correct.E) B) and C)
F) A) and B)

Question 10

If fluctuations in economic activity come from the supply side, higher inflation is associated with

Accepted Answer

A)   lower interest rates.
B)   structural deficits.
C)   higher rates of unemployment.
D)   lower rates of unemployment.E) A) and B)
F) B) and D)

Question 11

In the 1990s, the United States benefited from a series of favorable supply shocks. This caused a(n)

Accepted Answer

A)   increase in inflation and unemployment.
B)   decrease in inflation and unemployment.
C)   increase in inflation and a decrease in unemployment.
D)   decrease in inflation and an increase in unemployment.E) C) and D)
F) A) and B)

Question 12

According to the Phillips curve, in the short run, if policymakers choose an expansionary policy to lower the rate of unemployment, the economy will experience an increase in inflation.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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

Question 14

In the 1960s and early 1970s, many economists and policymakers thought the Phillips curve was

Accepted Answer

A)   interesting, but had no theory behind it.
B)   invalid and of no use to policymakers.
C)   of no interest in making macroeconomic policy.
D)   a "menu" of possible choices available to policymakers.E) B) and C)
F) B) and D)

Question 15

Which of the following observations concerning the Phillips curve is not true?

Accepted Answer

A)   They are normally upward-sloping.
B)   They are more commonly constructed for price inflation.
C)   They depict the inverse relation between wage inflation and unemployment.
D)   They depict the rate of unemployment on the horizontal axis.E) A) and C)
F) A) and B)

Question 16

A vocal minority of economists, believers in the theory of rational expectations, insist that

Accepted Answer

A)   the Phillips curve is downward sloping even in the short run.
B)   the Phillips curve is vertical even in the short run.
C)   a trade-off exists between inflation and unemployment even in the long run.
D)   expansionary fiscal and monetary policy can reduce unemployment without creating inflation.E) A) and D)
F) B) and C)

Question 17

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

Question 18

Rational expectations are forecasts

Accepted Answer

A)   that, while not necessarily correct, are the best that can be made given the available data.
B)   that are technically correct.
C)   that accurately predict the short-term trade-off between inflation and unemployment.
D)   made by economists using the most sophisticated econometric models.E) None of the above
F) A) and B)

Question 19

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

If fluctuations in economic activity come from the supply side, higher inflation is associated with

Correct Answer
verified

In the 1990s, the United States benefited from a series of favorable supply shocks. This caused a(n)

Correct Answer
verified

Many economists think that, in the long run, the Phillips curve is

Correct Answer
verified

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 Answer
verified

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

Correct Answer
verified

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

Correct Answer
verified

Define the following terms and explain their importance to the study of macroeconomics: a. Phillips curve b. rational expectations c. indexing d. stagflation

Correct Answer
verified
a. A Phillips curve is a graph depicting...
View Answer

A study of the U.S. price level and real GDP from 1972 to 2007 reveals a clear upward march toward higher prices and greater output. What explains this?

Correct Answer
verified

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

Correct Answer
verified
First, long-term contracts may be based ...
View Answer

Figure 33-3 Given the situation in graph (1) in Figure 33-3, what can be expected to change in graph (1) when the economy's self-correcting mechanism operates?

Correct Answer
verified

According to the Phillips curve, in the short run, if policymakers choose an expansionary policy to lower the rate of unemployment, the economy will experience an increase in inflation.

Correct Answer
verified

Which of the following observations concerning the Phillips curve is not true?

Correct Answer
verified

Rational expectations are forecasts

Correct Answer
verified

Which of the following could trigger supply-side inflation?

Correct Answer
verified

A vocal minority of economists, believers in the theory of rational expectations, insist that

Correct Answer
verified

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

Correct Answer
verified

If the aggregate supply curve shifts outward, then unemployment

Correct Answer
verified

The theory of rational expectations says that

Correct Answer
verified

In the 1960s and early 1970s, many economists and policymakers thought the Phillips curve was

Correct Answer
verified

Exam 33: The Trade-Off Between Inflation and Unemployment

If fluctuations in economic activity come from the supply side, higher inflation is associated with

Correct AnswerverifiedShow Answer

In the 1990s, the United States benefited from a series of favorable supply shocks. This caused a(n)

Correct AnswerverifiedShow Answer

Many economists think that, in the long run, the Phillips curve 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

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Define the following terms and explain their importance to the study of macroeconomics: a. Phillips curve b. rational expectations c. indexing d. stagflation

Correct Answerverifieda. A Phillips curve is a graph depicting...View AnswerShow Answer

A study of the U.S. price level and real GDP from 1972 to 2007 reveals a clear upward march toward higher prices and greater output. What explains this?

Correct AnswerverifiedShow Answer

Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach.

Correct AnswerverifiedFirst, long-term contracts may be based ...View AnswerShow Answer

Figure 33-3 Given the situation in graph (1) in Figure 33-3, what can be expected to change in graph (1) when the economy's self-correcting mechanism operates?

Correct AnswerverifiedShow Answer

According to the Phillips curve, in the short run, if policymakers choose an expansionary policy to lower the rate of unemployment, the economy will experience an increase in inflation.

Correct AnswerverifiedShow Answer

Which of the following observations concerning the Phillips curve is not true?

Correct AnswerverifiedShow Answer

Rational expectations are forecasts

Correct AnswerverifiedShow Answer

Which of the following could trigger supply-side inflation?

Correct AnswerverifiedShow Answer

A vocal minority of economists, believers in the theory of rational expectations, insist that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the aggregate supply curve shifts outward, then unemployment

Correct AnswerverifiedShow Answer

The theory of rational expectations says that

Correct AnswerverifiedShow Answer

In the 1960s and early 1970s, many economists and policymakers thought the Phillips curve was

Correct AnswerverifiedShow Answer

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a. A Phillips curve is a graph depicting...
View Answer

Correct Answer
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Correct Answer
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First, long-term contracts may be based ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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