Chapter 20 Macro

Front 1

Phillips found a negative relation between
a. output and unemployment.
b. output and employment.
c. wage inflation and unemployment.
d. None of the above is correct.

Back 1

c. wage inflation and unemployment.

Front 2

As aggregate demand shifts right along the aggregate supply curve,
a. inflation and unemployment are higher.
b. inflation is higher and unemployment is lower.
c. unemployment is higher and inflation is lower.
d. unemployment and inflation are lower.

Back 2

b. inflation is higher and unemployment is lower.

Front 3

Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply
moves the economy to
a. E and 1.
b. D and 2.
c. D and 3.
d. None of the above is correct.

Back 3

c. D and 3

Front 4

According to the Phillips curve, unemployment and inflation are negatively related in
a. the short run and in the long run.
b. the short run, but not in the long run.
c. the long run, but not in the short run.
d. neither the long run nor the short run.

Back 4

b. the short run, but not in the long run.

Front 5

The natural rate of unemployment
a. is constant over time.
b. varies over time, but can’t be changed by the government.
c. is the socially desirable rate of unemployment.
d. does not depend on the rate at which the Fed increases the money supply.

Back 5

d. does not depend on the rate at which the Fed increases the money supply.

Front 6

How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?
a. It would shift the long-run Phillips curve right.
b. It would shift the long-run Phillips curve left.
c. There would be an upward movement along a given long-run Phillips curve.
d. There would be a downward movement along a given long-run Philips curve.

Back 6

b. It would shift the long-run Phillips curve left.

Front 7

Refer to Figure 35-5. If the economy starts at C and the money supply growth rate increases, in the long run
the economy
a. stays at C.
b. moves to B.
c. moves to F.
d. None of the above is consistent wit an increase in the money supply growth rate.

Back 7

c. moves to F.

Front 8

On a given short-run Phillips curve which of the following is held constant?
a. the level of GDP
b. the unemployment rate
c. expected inflation
d. employment

Back 8

c. expected inflation

Front 9

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and
unemployment leads to
a. both higher inflation and higher unemployment in the long run.
b. higher inflation and no change in unemployment in the long run.
c. the same inflation rate and lower unemployment in the long run.
d. higher inflation and lower unemployment in the long run

Back 9

b. higher inflation and no change in unemployment in the long run.

Front 10

If inflation is greater than expected, then the unemployment rate is
a. above the natural rate. In the long run the short-run Phillips curve will shift right.
b. above the natural rate. In the long run the short-run Phillips curve will shift left.
c. below the natural rate. In the long run the short-run Phillips curve will shift right.
d. below the natural rate. In the long run the short-run Phillips curve will shift left.

Back 10

c. below the natural rate. In the long run the short-run Phillips curve will shift right.

Front 11

If there is an adverse supply shock, then
a. unemployment rises and the short-run Phillips curve shifts right.
b. unemployment rises and the short-run Phillips curve shifts left.
c. unemployment falls and the short-run Phillips curve shifts right.
d. unemployment falls and the short-run Phillips curve shifts left.

Back 11

a. unemployment rises and the short-run Phillips curve shifts right

Front 12

The sacrifice ratio is the
a. sum of the inflation and unemployment rates.
b. inflation rate divided by the unemployment rate.
c. number of percentage points annual output falls for each percentage point reduction in
inflation.
d. number of percentage points unemployment rises for each percentage point reduction in
inflation.

Back 12

c. number of percentage points annual output falls for each percentage point reduction in
inflation.

Front 13

Which of the following would tend to shorten recessions associated with anti-inflation policies by central
banks?
a. People adjust their expectations of inflation rapidly.
b. People believe policy announcements made by central bank officials.
c. The short-run Phillips shifts rapidly.
d. All of the above are correct.

Back 13

d. All of the above are correct.

Front 14

Other things the same, a country that decides to reduce inflation will
a. have a higher unemployment rate in the short run and the long run.
b. have a higher unemployment rate only in the long run.
c. have a higher unemployment rate only in the short run.
d. not have a higher unemployment rate in either the short run or the long run

Back 14

c. have a higher unemployment rate only in the short run.

Front 15

Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland has had an inflation
rate of 25% for many years.
Refer to Monetary Policy in Southland. Suppose that the Southland Department of Finance undertakes a
public relations campaign to convince people that it will soon change monetary policy to reduce inflation to
12.5%. If Southlanders believe their government then which, if any, curve(s) shift left?
a. the short-run and the long-run Phillips curve
b. the short-run but not the long run Phillips curve
c. the long-run but not the short-run Phillips curve
d. neither the short-run nor the long-run Phillips curve

Back 15

b. the short-run but not the long run Phillips curve