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Which of the following would reduce the natural rate of unemployment?


A) both an increase in the rate of money growth and increased unemployment compensation
B) an increase in the rate of money growth but not increased unemployment compensation
C) an increase in unemployment compensation but not an increase in the rate of money growth.
D) neither an increase in unemployment compensation nor an increase in the rate of money growth.

E) None of the above
F) A) and B)

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A policy that raised the natural rate of unemployment would shift


A) both the short-run and the long-run Phillips curves to the right.
B) the short-run Phillips curve right but leave the long-run Phillips curve unchanged.
C) the long-run Phillips curve right but leave the short-run Phillips curve unchanged.
D) neither the long-run Phillips curve nor the short-run Phillips curve right.

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

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Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

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Both reflect the classical dichotomy.The...

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There is a


A) short-run tradeoff between inflation and unemployment.
B) short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
C) long-run tradeoff between inflation and unemployment.
D) long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.

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

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As an economist working for a U.S.government agency you determine that a particular country has a sacrifice ratio of 3.Policy-makers in that country are thinking of lowering the inflation rate from 10% to 4%.Is this sacrifice ratio higher or lower than the typical estimate? From your numbers,what is the amount of output that will be lost for this country to reduce its inflation rate?


A) The sacrifice ratio is higher than the typical estimate.It will cost 30% of annual output to reach the new inflation target.
B) The sacrifice ratio is higher than the typical estimate.It will cost 18% of annual output to reach the new inflation target.
C) The sacrifice ratio is lower than the typical estimate.It will cost 30% of annual output to reach the new inflation target.
D) The sacrifice ratio is lower than the typical estimate.It will cost 18% of annual output to reach the new inflation target.

E) All of the above
F) A) and B)

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Figure 22-7 Use this graph to answer the questions below. Figure 22-7 Use this graph to answer the questions below. -Refer to figure 22-7.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy? A) 7% unemployment and 1% inflation B) 7% unemployment and 3% inflation C) 3% unemployment and 5% inflation D) 3% unemployment and 7% inflation -Refer to figure 22-7.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?


A) 7% unemployment and 1% inflation
B) 7% unemployment and 3% inflation
C) 3% unemployment and 5% inflation
D) 3% unemployment and 7% inflation

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

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If the natural rate of unemployment falls,


A) both the short-run Phillips curve and the long-run Phillips curve shift.
B) only the short-run Phillips curve shifts.
C) only the long-run Phillips curve shifts.
D) neither the short-run nor the long-run Phillips curves shift.

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

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A.W.Phillips's discovery of a particular relationship between unemployment and inflation for the United Kingdom


A) could not be extended to other countries,despite many researchers' attempts to provide that extension.
B) was quickly extended to other countries by researchers.
C) was extended to only one other country - the United States.
D) was harshly criticized by the American economists Paul Samuelson and Robert Solow on the grounds that Phillips's study was fundamentally flawed.

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

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Some countries have had relatively high inflation and relatively high unemployment for long periods of time.Is this consistent with the Phillips curve? Defend your answer.

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They are consistent with the long-run Ph...

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Friedman and Phelps believed that the natural rate of unemployment was constant.

A) True
B) False

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More flexible labor markets will shift


A) both the long-run Phillips curve and the long-run aggregate supply curve to the right.
B) both the long-run Phillips curve and the long-run aggregate supply curve to the left.
C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left.
D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right.

E) B) and D)
F) All of the above

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What does the natural-rate hypothesis claim?

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That eventually unem...

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Figure 22-6 Use the two graphs in the diagram to answer the following questions. Figure 22-6 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 22-6.Starting from C and 3,in the short run,an unexpected decrease in money supply growth moves the economy to A) A and 1. B) B and 2. C) back to C and 3. D) D and 4. -Refer to Figure 22-6.Starting from C and 3,in the short run,an unexpected decrease in money supply growth moves the economy to


A) A and 1.
B) B and 2.
C) back to C and 3.
D) D and 4.

E) A) and B)
F) None of the above

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Milton Friedman argued that the Fed's control over the money supply could be used to peg


A) the level or growth rate of a nominal variable,but not the level or growth rate of a real variable.
B) the level of a nominal or real variable,but not the growth rate of a real or nominal variable.
C) the level or growth rate of a real variable,but not the level or growth rate of a nominal variable.
D) both levels and growth rates of both real and nominal variables.

E) All of the above
F) A) and D)

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Figure 22-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate. Figure 22-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.On the right-hand diagram,U represents the unemployment rate. -Refer to Figure 22-1.Assuming the price level in the previous year was 100,point G on the right-hand graph corresponds to A) point A on the left-hand graph. B) point B on the left-hand graph. C) point C on the left-hand graph. D) point D on the left-hand graph. -Refer to Figure 22-1.Assuming the price level in the previous year was 100,point G on the right-hand graph corresponds to


A) point A on the left-hand graph.
B) point B on the left-hand graph.
C) point C on the left-hand graph.
D) point D on the left-hand graph.

E) A) and C)
F) C) and D)

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If policymakers decrease aggregate demand,then in the long run


A) prices will be lower and unemployment will be higher.
B) prices will be lower and unemployment will be unchanged.
C) prices and unemployment will be unchanged.
D) None of the above is correct.

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

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If people eventually adjust their inflation expectations so that in the long run actual and expected inflation are the same,then policymakers


A) can not exploit a tradeoff between inflation and unemployment in either the short or long run.
B) can exploit a tradeoff between inflation and unemployment in the short run but not in the long run.
C) can exploit a tradeoff between inflation and unemployment in both the short run and the long run.
D) can exploit a tradeoff between inflation and unemployment in the long run,but not the short run.

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

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What is meant by accommodation?

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A central bank is said to acco...

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The short-run Phillips curve shows the combinations of


A) unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve.
B) unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
C) real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
D) None of the above is correct.

E) A) and B)
F) None of the above

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The economy will move to a point on the short-run Phillips curve where unemployment is higher if


A) the inflation rate decreases.
B) the government increases its expenditures.
C) the Fed increases the money supply.
D) None of the above is correct.

E) A) and B)
F) None of the above

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