Question 1

The Phillips curve hypothesis provides support for active stabilization policies. Explain in
words and illustrate using a graph of aggregate-demand and aggregate supply.

Accepted Answer

The Phillips curve hypothesis suggests t...

Question 2

Stagflation implies that

Accepted Answer

A)   policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation.
B)   a tradeoff between inflation and unemployment may not always exist.
C)   any relationship between the inflation and unemployment was purely random.
D)   the relationship predicted by the Phillips curve is stable.E) B) and D)
F) None of the above

Question 3

What is a reservation wage?

Accepted Answer

A)   It is the highest wage that an unemployed worker would accept, if it were offered.
B)   It is the lowest wage that an unemployed worker would accept, if it were offered.
C)   It is the highest wage that an employer will offer a potential worker if there are many candidates vying for the job.
D)   It is the lowest wage that an unemployed worker would accept, excluding any non-pecuniary benefits.E) B) and C)
F) C) and D)

Question 4

Figure 16-2 
-Refer to Figure 16-2. The figure shows the three inflation-unemployment
Phases. What are these three phases, moving clockwise from point A?

Accepted Answer

A)   Phillips phase, recovery phase, stagflation phase
B)   Recovery phase, stagflation phase, Phillips phase
C)   Phillips phase, stagflation phase, recovery phase
D)   Stagflation phase, recovery phase, Phillips phaseE) None of the above
F) A) and B)

Question 5

Expectations of higher inflation rates cause a leftward shift in the short-run aggregate
supply curve and usher in a stagflation phase of the inflation-unemploymentrelationship.

Accepted Answer

A) True 
 B)False

Question 6

In the 1960s and early 70s, economists believed that the short-run Phillips curve indicated that policymakers could choose the mix of inflation and unemployment they were willing to accept and achieved this with appropriate fiscal and monetary policies.

Accepted Answer

A) True 
 B)False

Question 7

Suppose an economy is operating with a recessionary 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.E) C) and D)
F) All of the above

Question 8

In the long run, monetary growth

Accepted Answer

A)   can change the unemployment rate only at the cost of increased inflation.
B)   can change the unemployment rate while holding the inflation rate constant.
C)   can promote economic growth.
D)   cannot affect the factors that determine the economy's unemployment rate.E) All of the above
F) A) and D)

Question 9

Figure 16-3
Panel (a)  Panel (b)  P)  is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a) , the aggregate demand curve in Period 1 is AD1. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b)  point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a)  corresponds to point G in Panel (b)  and point d in Panel (a)  corresponds to point H in Panel (b) . -Refer to Figure 16-3. Suppose the economy is operating at point a. If policymakers Undertake expansionary policies in period 1, what happens if there are lags in the application Of policy? A)  The economy may not experience any change in the price level or level of employment. B)  The economy could move past full employment to AD3 and encounter an inflationary gap. C)  The economy could be stuck in a below full-employment equilibrium such as at point b. D)  The economy could experience deflation resulting in a movement along the Phillips phase from point G to point F. " class="answers-bank-image d-inline" rel="preload" > P)  is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a) , the aggregate demand curve in Period 1 is AD1. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b)  point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a)  corresponds to point G in Panel (b)  and point d in Panel (a)  corresponds to point H in Panel (b) . -Refer to Figure 16-3. Suppose the economy is operating at point a. If policymakers Undertake expansionary policies in period 1, what happens if there are lags in the application Of policy? A)  The economy may not experience any change in the price level or level of employment. B)  The economy could move past full employment to AD3 and encounter an inflationary gap. C)  The economy could be stuck in a below full-employment equilibrium such as at point b. D)  The economy could experience deflation resulting in a movement along the Phillips phase from point G to point F. " class="answers-bank-image d-inline" rel="preload" > Suppose the level of potential output (YP)  is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a) , the aggregate demand curve in Period 1 is AD1. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b)  point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a)  corresponds to point G in Panel (b)  and point d in Panel (a)  corresponds to point H in Panel (b) .
-Refer to Figure 16-3. Suppose the economy is operating at point a. If policymakers
Undertake expansionary policies in period 1, what happens if there are lags in the application
Of policy?

Accepted Answer

A)   The economy may not experience any change in the price level or level of employment.
B)   The economy could move past full employment to AD3 and encounter an inflationary gap.
C)   The economy could be stuck in a below full-employment equilibrium such as at point b.
D)   The economy could experience deflation resulting in a movement along the Phillips phase from point G to point F.E) B) and C)
F) All of the above

Question 10

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

Question 11

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP)  in the long run?

Accepted Answer

A)   If %∆M > %∆ YP , then %∆P > %∆M.
B)   If %∆M > %∆ YP , then %∆P > %∆ YP.
C)   If %∆M = %∆ YP , then %∆P = 0.
D)   If %∆M = %∆ YP , then %∆P E) All of the above
F) A) and B)

Question 12

The lowest wage that a worker would accept, if offered a job, is called

Accepted Answer

A)   the reservation wage.
B)   a subsistence wage.
C)   the exploitation wage.
D)   the equilibrium market wage.E) A) and D)
F) B) and C)

Question 13

If workers and firms adjust their expectations of future prices in a higher price level, the
short-run aggregate supply curve shifts to the right.

Accepted Answer

A) True 
 B)False

Question 14

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap. As suggested by the Phillips curve hypothesis, policy makers instituted a combination of contractionary fiscal and monetary policies to eliminate the output gap. Which of the following occurred as a result?

Accepted Answer

A)   The policies moved the economy from the stagflation phase to the Phillips phase.
B)   The policies successfully reduced inflation and increased unemployment.
C)   The outcome suggested by the Phillips phase did not occur, instead unemployment rose with virtually no change in inflation.
D)   The policies moved the economy from a recovery phase to a stagflation phase.E) All of the above
F) B) and D)

Question 15

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

Accepted Answer

A)   Phillips phase
B)   Growth phase
C)   Stagflation phase
D)   Recovery phaseE) B) and C)
F) None of the above

Question 16

Prior to the 1970s, the model of choice was the aggregate expenditures model. According to
This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be

Accepted Answer

A)   excessive bank lending.
B)   potential crises in financial markets.
C)   inflation.
D)   excess aggregate demand.E) None of the above
F) C) and D)

Question 17

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%∆P) 
Can be expressed as

Accepted Answer

A)   %∆P = %∆M ÷ %∆Y
B)   %∆P = %∆M + %∆Y
C)   %∆P = %∆M  ×	imes×  %∆Y
D)   %∆P = %∆M - %∆Y E) None of the above
F) A) and D)

Question 18

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy
Was still in a recessionary gap left over from the 1990-1991 recession. Which of the
Following best explains this move?

Accepted Answer

A)   The Fed was concerned that the budget deficit would increase.
B)   The Fed had failed to take into account the lag in monetary policy.
C)   The Fed was taking explicit account of the lag in monetary policy.
D)   The Fed wanted to avert a potential housing market crisis.E) None of the above
F) B) and D)

Exam 31: The Impacts of Government Borrowing

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%∆P) Can be expressed as

Correct Answer
verified

If workers and firms adjust their expectations of future prices in a higher price level, the short-run aggregate supply curve shifts to the right.

Correct Answer
verified

Correct Answer
verified

The Phillips curve hypothesis provides support for active stabilization policies. Explain in words and illustrate using a graph of aggregate-demand and aggregate supply.

Correct Answer
Answered by ExamLex AI
The Phillips curve hypothesis suggests t...
View Answer

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

Correct Answer
verified

Figure 16-2 -Refer to Figure 16-2. The figure shows the three inflation-unemployment Phases. What are these three phases, moving clockwise from point A?

Correct Answer
verified

Stagflation implies that

Correct Answer
verified

The lowest wage that a worker would accept, if offered a job, is called

Correct Answer
verified

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

What is a reservation wage?

Correct Answer
verified

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

Correct Answer
verified

Expectations of higher inflation rates cause a leftward shift in the short-run aggregate supply curve and usher in a stagflation phase of the inflation-unemploymentrelationship.

Correct Answer
verified

In the 1960s and early 70s, economists believed that the short-run Phillips curve indicated that policymakers could choose the mix of inflation and unemployment they were willing to accept and achieved this with appropriate fiscal and monetary policies.

Correct Answer
verified

In the long run, monetary growth

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 at an income greater than the full employment level, then the primary economic problem would be

Correct Answer
verified

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

Correct Answer
verified

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession. Which of the Following best explains this move?

Correct Answer
verified

Exam 31: The Impacts of Government Borrowing

Using the equation of exchange, if velocity is stable in the long run, the inflation rate, (%∆P) Can be expressed as

Correct AnswerverifiedShow Answer

If workers and firms adjust their expectations of future prices in a higher price level, the short-run aggregate supply curve shifts to the right.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Phillips curve hypothesis provides support for active stabilization policies. Explain in words and illustrate using a graph of aggregate-demand and aggregate supply.

Correct AnswerAnswered by ExamLex AIThe Phillips curve hypothesis suggests t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 16-2 -Refer to Figure 16-2. The figure shows the three inflation-unemployment Phases. What are these three phases, moving clockwise from point A?

Correct AnswerverifiedShow Answer

Stagflation implies that

Correct AnswerverifiedShow Answer

The lowest wage that a worker would accept, if offered a job, is called

Correct AnswerverifiedShow Answer

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

What is a reservation wage?

Correct AnswerverifiedShow Answer

In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment relationship does this conform to?

Correct AnswerverifiedShow Answer

Expectations of higher inflation rates cause a leftward shift in the short-run aggregate supply curve and usher in a stagflation phase of the inflation-unemploymentrelationship.

Correct AnswerverifiedShow Answer

In the 1960s and early 70s, economists believed that the short-run Phillips curve indicated that policymakers could choose the mix of inflation and unemployment they were willing to accept and achieved this with appropriate fiscal and monetary policies.

Correct AnswerverifiedShow Answer

In the long run, monetary growth

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 at an income greater than the full employment level, then the primary economic problem would be

Correct AnswerverifiedShow Answer

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (YP) in the long run?

Correct AnswerverifiedShow Answer

In early in 1994, the Federal Reserve shifted to a contractionary policy although the economy Was still in a recessionary gap left over from the 1990-1991 recession. Which of the Following best explains this move?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
The Phillips curve hypothesis suggests t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

Correct Answer
verified

Correct Answer
verified