Question 1

If the growth rate of resources is zero and real output is growing at 4 percent, then total factor productivity has risen by 4 percent.

Accepted Answer

A) True 
 B)False

Question 2

U.S. economic data from 1955 to 2009 give evidence of

Accepted Answer

A)   a positive relationship between the unemployment rate and inflation.
B)   a negative relationship between the unemployment rate and inflation.
C)   a constant rate of unemployment with changing rates of inflation.
D)   a constant rate of inflation with changing rates of unemployment.
E)   no particular relationship between the unemployment rate and inflation.

Question 3

According to the Phillips curve, the cost of reducing inflation is a higher unemployment rate.

Accepted Answer

A) True 
 B)False

Question 4

Long-term economic growth requires a permanent

Accepted Answer

A)   decline in the average price level.
B)   leftward shift of the vertical Phillips curve.
C)   rise in the natural rate of unemployment.
D)   rightward shift of the aggregate demand curve.
E)   rightward shift of the vertical aggregate supply curve.

Question 5

The tradeoff between inflation and the unemployment rate comes from expected inflation.

Accepted Answer

A) True 
 B)False

Question 6

If the short-run Phillips curve shifts to the right, we can conclude that

Accepted Answer

A)   the tradeoff between inflation and unemployment worsens over time.
B)   the tradeoff between inflation and unemployment improves over time.
C)   higher inflation rates are associated with any given level of unemployment.
D)   the tradeoff between inflation and unemployment remains unchanged.
E)   the unemployment rate rises for any given inflation rate.

Question 7

Suppose that the economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent. If labor and capital are the only inputs and capital contributes 25 percent to GDP, then the labor force has risen by

Accepted Answer

A)   1.5 percent.
B)   2 percent.
C)   4 percent.
D)   6 percent.
E)   8 percent.

Question 8

In rational expectations theory, an expected increase in the money supply is represented by an upward movement along the vertical Phillips curve.

Accepted Answer

A) True 
 B)False

Question 9

A expansionary real shock shifts the aggregate

Accepted Answer

A)   supply curve to the left and increases real GDP.
B)   demand curve to the left and increases real GDP.
C)   demand curve to the right and decreases real GDP.
D)   supply curve to the right and increases real GDP.
E)   supply curve to the left and reduces real GDP.

Question 10

Suppose that the economy grows by 3 percent, the labor force rises by 2 percent, and capital rises by 1 percent. If capital takes 40 percent of real GDP and labor takes 60 percent of real GDP, then the growth in total factor productivity must be

Accepted Answer

A)   14 percent.
B)   1.4 percent.
C)   0.6 percent.
D)   6 percent.
E)   10 percent.

Question 11

Total factor productivity is the ratio of

Accepted Answer

A)   skilled labor to unskilled labor.
B)   wartime productivity to peacetime productivity.
C)   manufacturing productivity to service productivity.
D)   agricultural productivity to industrial productivity.
E)   the economy's output to its stock of capital and labor.

Question 12

The slope of the short-run Phillips curve is consistent with the

Accepted Answer

A)   long-run tradeoff between the unemployment rate and inflation.
B)   long-run tradeoff between inflation and GDP.
C)   short-run tradeoff between the money supply and interest rates.
D)   short-run tradeoff between business productivity and wage contracts.
E)   short-run tradeoff between the unemployment rate and inflation.

Question 13

Along the short-run Phillips curve, the

Accepted Answer

A)   actual inflation rate is equal to the expected inflation rate.
B)   expected inflation rate is constant.
C)   observed unemployment rate is equal to the natural rate of unemployment.
D)   real wage rate is zero.
E)   nominal wage rate is constant.

Question 14

Which of the following statements is not consistent with the theory of rational expectations?

Accepted Answer

A)   The Phillips curve is vertical.
B)   Expansionary fiscal policy that is anticipated is ineffective even in the short run.
C)   The aggregate supply curve is vertical.
D)   People adjust slowly to changes in the inflation rate.
E)   A downward-sloping Phillips curve does not exist for expected changes.

Question 15

Figure 16.2
 
-Refer to Figure 16.2. Movement from point A to point B could be the result of a(n)

Accepted Answer

A)   increase in the money supply.
B)   decrease in government spending.
C)   decrease in the money supply.
D)   increase in tax rates.
E)   economic recession.

Question 16

According to the adaptive expectations view, the Phillips curve is

Accepted Answer

A)   vertical in both the short run and the long run.
B)   downward sloping in the short run and vertical in the long run.
C)   downward sloping in both the short run and the long run.
D)   horizontal in both the short run and the long run.
E)   vertical in the short run and downward sloping in the long run.

Question 17

Suppose that the economy grows by 4 percent, total factor productivity grows by 3 percent, and the labor force increases by 6 percent. If labor and capital are the only inputs and labor contributes 40 percent to GDP, then the stock of capital must have

Accepted Answer

A)   fallen by 5 percent.
B)   fallen by 3 percent.
C)   fallen by 2 1/3 percent.
D)   risen by 3 percent.
E)   risen by 7 percent.

Question 18

An increase in the long-run aggregate supply curve reflects economic growth.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that the economy grows by 3 percent, total factor productivity grows by 2 percent, and the labor force grows by 2 percent. If labor contributes 40 percent to real GDP, then the stock of capital must have risen by 0.33 percent.

Accepted Answer

A) True 
 B)False

Question 20

Figure 16.3
 
-In Figure 16.3, movement from point C to point D corresponds to a

Accepted Answer

A)   rightward shift of the aggregate demand curve.
B)   rightward shift of the aggregate supply curve.
C)   movement down the long-run aggregate supply curve.
D)   leftward shift of the aggregate supply curve.
E)   leftward shift of the aggregate demand curve.

Exam 16: Macroeconomic Policy, Business Cycles, and Growth

A expansionary real shock shifts the aggregate

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In rational expectations theory, an expected increase in the money supply is represented by an upward movement along the vertical Phillips curve.

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Along the short-run Phillips curve, the

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Total factor productivity is the ratio of

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If the growth rate of resources is zero and real output is growing at 4 percent, then total factor productivity has risen by 4 percent.

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According to the adaptive expectations view, the Phillips curve is

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Which of the following statements is not consistent with the theory of rational expectations?

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The slope of the short-run Phillips curve is consistent with the

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U.S. economic data from 1955 to 2009 give evidence of

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The tradeoff between inflation and the unemployment rate comes from expected inflation.

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Suppose that the economy grows by 4 percent, total factor productivity grows by 3 percent, and the labor force increases by 6 percent. If labor and capital are the only inputs and labor contributes 40 percent to GDP, then the stock of capital must have

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Figure 16.3 -In Figure 16.3, movement from point C to point D corresponds to a

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An increase in the long-run aggregate supply curve reflects economic growth.

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Figure 16.2 -Refer to Figure 16.2. Movement from point A to point B could be the result of a(n)

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Suppose that the economy grows by 3 percent, total factor productivity grows by 2 percent, and the labor force grows by 2 percent. If labor contributes 40 percent to real GDP, then the stock of capital must have risen by 0.33 percent.

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Long-term economic growth requires a permanent

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If the short-run Phillips curve shifts to the right, we can conclude that

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Suppose that the economy grows by 3 percent, the labor force rises by 2 percent, and capital rises by 1 percent. If capital takes 40 percent of real GDP and labor takes 60 percent of real GDP, then the growth in total factor productivity must be

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According to the Phillips curve, the cost of reducing inflation is a higher unemployment rate.

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Suppose that the economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent. If labor and capital are the only inputs and capital contributes 25 percent to GDP, then the labor force has risen by

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