1. The negative slope of the shorten-run Phillips curve is consistent with; a. t
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Question
1. The negative slope of the shorten-run Phillips curve is consistent with;
a. the long-run tradeoff between inflation and GDP
b. the long-run tradeoff between the unemployment rate and inflation rate.
c. the short-run tradeoff between the unemployment rate and inflation rate.
d. the short-run tradeoff between business productivity and wage contracts.
e. the short-run tradeoff between the money supply and interest rates.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
2. According to the short-run Phillips curve, an expansionary monetary policy by the Fed would, in the short-run:
a. reduce both inflation and unemployment
b. reduce unemployment at the cost of higher inflation in the economy
c. increase both inflation and unemployment.
d. reduce inflation at the cost of a rise in the natural rate of unemployment.
e. reduce inflation and leave the natural unemployment rate unchanged.
3. In the short run, an unexpected decline in aggregate demand would be associated with:
a. a movement up along the Phillips curve.
b. a movement down along the Phillips curve.
c. an outward shift of the Phillips curve.
d. no change along the Phillips curve.
e. an inward shift of the Phillips curve.
4. The long-run aggregate supply curve at potential GDP is analogous to:
a. the short-run aggregate demand curve at potential national income.
b. the short-run Phillips curve at the natural rate of unemployment.
c. the horizontal portion of the Phillips curve.
d. the long-run Phillips curve at the natural rate of unemployment.
e. the long-run aggregate demand curve at each price level.
5. The natural rate of unemployment is defined as the unemployment rate that exists in the absence of:
a. seasonal unemployment
b. both structural and frictional unemployment
c. structural unemployment
d. cyclical unemployment
e. frictional unemployment
6. The actual unemployment rate is less than the natural rate of unemployment if:
a. the inflation rate is lower than expected
b. the reservation wage is adjusted to account for higher inflation.
c. the inflation rate is higher than expected
d. reservation wages go up with the rate of inflation
e. real wage increases with increase in prices
7. The actual rate of inflation is equal to the expected rate of inflation along the:
a. horizontal aggregate supply curve
b. downward-sloping short-run Phillips curve
c. upward-sloping aggregate supply curve
d. vertical long-run Phillips curve
e. downward-sloping aggregate demand curve
8. A time-consistent monetary policy is one that:
a. is set by congressional decree.
b. changes over time as economic conditions change.
c. follows a zero percent inflation rate.
d. does not adapt to changing economic conditions.
e. is based on monetary targets established by law
9. The oil price shocks in the US during the 1970s would have caused:
a. a decrease in AD and hence a decline in inflation but higher unemployment.
b. a decrease in the short-run AS and hence an increase in both the price level and unemployment rate.
c. an increase in the short-run AS and hence a decline in both the price level and the unemployment rate.
d. an increase in both AD and AS and hence more GDP
e. a leftward shift of the Phillips curve and hence lower inflation.
10. Which of the following would NOT be considered a real variable in determining a real business cycle?
a. A hurricane that wipes out oil refineries
b. A change in technology
c. An increase in the money supply
d. A labor strike
11. A negative supply shock will:
a. shift the AS curve to the left and increase real GDP
b. shift the AD curve to the left and reduce real GDP
c. shift the AS curve to the right and increase real GDP.
d. shift the AS curve to the left and reduce real GDP.
e. shift the AD curve to the right and increase real GDP.
12. Government spending can be financed by all of the following, except:
a. personal income taxes
b. investment spending
c. money creation
d. government borrowing
e. excise taxes
13. In traditional Keynesian economics:
a. the AS curve is upward-sloping
b. the AS curve is vertical
c. the AD curve is vertical
d. the AS curve is horizontal
e. the AD curve is horizontal
14. The new Keynesian economists believed that:
a. wages and real GDP are not flexible in the long run
b. wages and real GDP are flexible in the short run
c. wages and prices are flexible in the short run
d. wages and prices are not flexible in the short run
e. wages and prices are not flexible in the long run.
15. Monetarists think that the government
a. should consciously set out to achieve full employment
b. should intervene in the economy as little as possible
c. should change the money supply growth rate on a discretionary basis to achieve low inflation
d. should take an active role in the economy
e. should actively intervene in the economy, but only by decreasing the fiscal expenditure.
16. Hyperinflation in developing countries is typically the result of:
a. large government fiscal deficits financed by continuously increasing money supply
b. high income tax rates and low government fiscal deficits
c. an economic recession
d. large trade deficits
e. high interest rates due to low money supply
Explanation / Answer
1 c 2 d 3 c 4 a 5 a 6 b 7 c 8 a 9 d 10 c 11 b 12 c 13 a 14 b 15 a 16 d
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