Question 1

In the recovery phase of the inflation-unemployment cycle,

Accepted Answer

A)  the inflation rate rises.
B)  although the price level rises, the inflation rate falls.
C)  the price level falls.
D)  the price level and the inflation rate fall.

Question 2

Sustained inflation over many years is most likely due to increases in the money supply in excess of increases in potential output.

Accepted Answer

A) True 
 B)False

Question 3

In the long run, sustained inflation is due to

Accepted Answer

A)  a one-time increase in money growth.
B)  a continuous increase in the money growth rate.
C)  a continuous increase in aggregate demand.
D)  the rising price of oil.

Question 4

Figure 16-7
 1 to SRAS2. D) it will move to point 2 because the aggregate demand curve is likely to shift left in response to higher prices." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 16-7.If the economy is in equilibrium at point 3,

Accepted Answer

A)  it will most likely stay there for an indeterminate period.
B)  the SRAS will most likely shift to the left because of firms and workers asking for higher prices and wages.
C)  it will move to point 5 because of a shift in the aggregate supply curve from SRAS1 to SRAS2.
D)  it will move to point 2 because the aggregate demand curve is likely to shift left in response to higher prices.

Question 5

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium below full employment, then the primary economic problem would be

Accepted Answer

A)  unemployment.
B)  deflation.
C)  financing the government budget deficit.
D)  financing unemployment compensation.

Question 6

Suppose that rising productivity increases potential output in each period by 4%.What kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

Accepted Answer

A)  It should keep money supply constant.
B)  It should increase money supply by 4% per period.
C)  It should increase money supply by 4% in the first period and thereafter, hold money supply constant.
D)  It should decrease money supply by 4% each period.

Question 7

For a given labor force, an increase in real GDP implies a decrease in unemployment.

Accepted Answer

A) True 
 B)False

Question 8

In the recovery phase of the inflation-unemployment cycle,

Accepted Answer

A)  inflation and unemployment fall.
B)  inflation rises as unemployment falls.
C)  inflation falls as unemployment rises.
D)  inflation and real GDP rise.

Question 9

In the three phases of the inflation-unemployment cycle, a period marked by rising unemployment and high inflation is called the

Accepted Answer

A)  inflationary phase.
B)  stagflation phase.
C)  Phillips phase.
D)  recovery phase.

Question 10

Suppose an economy is operating with a contractionary gap.In this case, policymakers would seek to move the economy

Accepted Answer

A)  back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.
B)  up the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.
C)  back down the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.
D)  up the Phillips curve toward an unemployment rate that is further from the natural rate of unemployment.

Question 11

Which of the following is a cost of unemployment?
I.output foregone
II.unemployment compensation that must be paid
III.rising inflation that erodes the value of money

Accepted Answer

A)  I, II, and III
B)  I and II
C)  I and III
D)  II and III

Question 12

The efficiency-wage theory predicts that

Accepted Answer

A)  profit-maximizing firms will maintain the wage level at a rate too low to achieve full employment in the labor market.
B)  wage rigidities will be eliminated even in the short-run.
C)  will maintain the wage level at a rate too high to achieve full employment in the labor market.
D)  the labor market clears at a wage rate above equilibrium.

Question 13

As the duration of job search increases, there will likely be

Accepted Answer

A)  an increase in the reservation wage and an increase in the best offer received.
B)  an increase in the reservation wage and a decrease in the best offer received.
C)  a decrease in the reservation wage and an increase in the best offer received.
D)  a decrease in the reservation wage and a decrease in the best offer received.

Question 14

Which of the following affect the values of inflation and unemployment? 
I.changes in government spending II.expectations about the price level
III.changes in nominal wages IV.changes in money supply

Accepted Answer

A)  I and IV only
B)  I, II, and IV only
C)  II and III only
D)  I, II, III, and IV

Question 15

Figure 16-6
 g? A) Workers will agree to take wage cuts and firms will agree to lower prices to ward off inflation. B) They will revise their expectations of future prices to incorporate the higher price level. C) Firms with sticky prices will ultimately adjust their prices downward. D) Firms and workers will agree to renegotiate wage contracts downward." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.What happens when workers and firms become aware of a rise in the general price to Pg?

Accepted Answer

A)  Workers will agree to take wage cuts and firms will agree to lower prices to ward off inflation.
B)  They will revise their expectations of future prices to incorporate the higher price level.
C)  Firms with sticky prices will ultimately adjust their prices downward.
D)  Firms and workers will agree to renegotiate wage contracts downward.

Exam 31: Macro Inflation and Unemployment

In the long run, sustained inflation is due to

Correct Answer
verified

Which of the following affect the values of inflation and unemployment? I.changes in government spending II.expectations about the price level III.changes in nominal wages IV.changes in money supply

Correct Answer
verified

Suppose that rising productivity increases potential output in each period by 4%.What kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

Correct Answer
verified

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium below full employment, then the primary economic problem would be

Correct Answer
verified

Sustained inflation over many years is most likely due to increases in the money supply in excess of increases in potential output.

Correct Answer
verified

In the recovery phase of the inflation-unemployment cycle,

Correct Answer
verified

In the recovery phase of the inflation-unemployment cycle,

Correct Answer
verified

Figure 16-6 -Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.What happens when workers and firms become aware of a rise in the general price to P_g?

Correct Answer
verified

Which of the following is a cost of unemployment? I.output foregone II.unemployment compensation that must be paid III.rising inflation that erodes the value of money

Correct Answer
verified

As the duration of job search increases, there will likely be

Correct Answer
verified

Suppose an economy is operating with a contractionary gap.In this case, policymakers would seek to move the economy

Correct Answer
verified

Figure 16-7 -Refer to Figure 16-7.If the economy is in equilibrium at point 3,

Correct Answer
verified

In the three phases of the inflation-unemployment cycle, a period marked by rising unemployment and high inflation is called the

Correct Answer
verified

The efficiency-wage theory predicts that

Correct Answer
verified

For a given labor force, an increase in real GDP implies a decrease in unemployment.

Correct Answer
verified

Exam 31: Macro Inflation and Unemployment

In the long run, sustained inflation is due to

Correct AnswerverifiedShow Answer

Which of the following affect the values of inflation and unemployment? I.changes in government spending II.expectations about the price level III.changes in nominal wages IV.changes in money supply

Correct AnswerverifiedShow Answer

Suppose that rising productivity increases potential output in each period by 4%.What kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

Correct AnswerverifiedShow Answer

Prior to the 1970s, the model of choice was the aggregate expenditures model.According to This model, if the economy was in equilibrium below full employment, then the primary economic problem would be

Correct AnswerverifiedShow Answer

Sustained inflation over many years is most likely due to increases in the money supply in excess of increases in potential output.

Correct AnswerverifiedShow Answer

In the recovery phase of the inflation-unemployment cycle,

Correct AnswerverifiedShow Answer

In the recovery phase of the inflation-unemployment cycle,

Correct AnswerverifiedShow Answer

Figure 16-6 -Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.What happens when workers and firms become aware of a rise in the general price to Pg?

Correct AnswerverifiedShow Answer

Which of the following is a cost of unemployment? I.output foregone II.unemployment compensation that must be paid III.rising inflation that erodes the value of money

Correct AnswerverifiedShow Answer

As the duration of job search increases, there will likely be

Correct AnswerverifiedShow Answer

Suppose an economy is operating with a contractionary gap.In this case, policymakers would seek to move the economy

Correct AnswerverifiedShow Answer

Figure 16-7 -Refer to Figure 16-7.If the economy is in equilibrium at point 3,

Correct AnswerverifiedShow Answer

In the three phases of the inflation-unemployment cycle, a period marked by rising unemployment and high inflation is called the

Correct AnswerverifiedShow Answer

The efficiency-wage theory predicts that

Correct AnswerverifiedShow Answer

For a given labor force, an increase in real GDP implies a decrease in unemployment.

Correct AnswerverifiedShow Answer

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Figure 16-6 -Refer to Figure 16-6.Suppose the economy was operating at point e in period 1.Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3.What happens when workers and firms become aware of a rise in the general price to P_g?

Correct Answer
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Correct Answer
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