15.5 Integrative Questions
1) Moving along a short-run Phillips curve, a reduction in the unemployment rate is achieved by
A) shifting the aggregate supply curve leftward.
B) running a federal budget deficit.
C) reducing the size of the labor force.
D) increasing the inflation rate.
E) increasing potential GDP.
2) Along a short-run Phillips curve when the inflation rate rises,
A) the real wage rate falls and more labor is hired.
B) the money wage rate falls because the labor market becomes less tight.
C) potential GDP decreases.
D) the expected inflation rate rises.
E) the expected inflation rate falls.
3) The long-run Phillips curve shows the relationship between the ________ and the ________ when there is no ________ unemployment.
A) inflation rate; unemployment rate; cyclical
B) inflation rate; unemployment rate; structural
C) inflation rate; employment rate; seasonal
D) nominal interest rate; real interest rate; frictional
E) nominal interest rate; unemployment rate; cyclical
4) The long-run Phillips curve represents the relationship between the inflation rate and the unemployment rate when there is no ________ unemployment.
A) cyclical
B) structural
C) seasonal
D) frictional
E) natural
5) In 1981 Fed policy created a severe recession because the Fed
A) increased aggregate supply to reduce the inflation rate.
B) undertook an unexpected reduction in the inflation rate.
C) publicly announced an inflation reduction program.
D) undertook an unexpected increase in the inflation rate.
E) publicly announced an inflation increase program.
6) In the United States during the 1970s, the unemployment rate rose from previous years, and the inflation rate increased rapidly. This set of events is best described by saying that the
A) economy moved to a lower point on its short-run Phillips curve but the short-run Phillips curve did not shift.
B) short-run Phillips curve shifted downward.
C) short-run Phillips curve shifted upward.
D) economy moved to a higher point on its short-run Phillips curve but the short-run Phillips curve did not shift.
E) the long-run Phillips curve shifted leftward.
7) In the United States during the late 1990s, the unemployment rate fell from previous years and the inflation rate was lower than in previous years. This set of events is best described by saying that the
A) economy moved to a lower point on its short-run Phillips curve but the short-run Phillips curve did not shift.
B) short-run Phillips curve shifted downward.
C) short-run Phillips curve shifted upward.
D) economy moved to a higher point on its short-run Phillips curve but the short-run Phillips curve did not shift.
E) long-run Phillips curve shifted rightward.
8) Which of the following could create a movement along the short-run Phillips curve so that the unemployment rate temporarily falls below the natural unemployment rate?
A) an increase in aggregate demand and a sticky wage rate
B) a decrease in aggregate demand and a sticky wage rate
C) an increase in aggregate demand and a quickly responsive wage rate
D) a decrease in aggregate demand and a quickly responsive wage rate
E) an increase in aggregate supply and a sticky wage rate
9) Along a given ________ Phillips curve, a lower unemployment rate can be achieved only by paying the cost of a ________ inflation rate, and a lower inflation rate can be achieved only by paying the cost of a ________ unemployment rate.
A) short-run; higher; higher
B) short-run; higher; lower
C) short-run; lower; higher
D) long-run; higher; higher
E) long-run; higher; lower
10) If ________ GDP exceeds ________ GDP, employment exceeds its full-employment level and the unemployment rate is ________ the natural unemployment rate.
A) real; potential; below
B) real; potential; above
C) nominal; potential; below
D) nominal; potential; above
E) real; nominal; below
11) If real GDP is ________ than potential GDP, employment is ________ than its full-employment level and the unemployment rate rises ________ the natural unemployment rate.
A) less; more; above
B) more; more; above
C) less; less; above
D) less; less; below
E) more; less; above
12) The natural rate hypothesis asserts that in the ________, the money wage rate is fixed and the ________ in the inflation rate brings a(n) ________ in the unemployment rate.
A) short-run; decrease; increase
B) short-run; decrease; decrease
C) long-run; increase; decrease
D) short-run; increase; decrease
E) short-run; increase; increase
13) If the inflation that results from targeting unemployment becomes unacceptably high, low inflation can be restored. Lower inflation can be obtained by ________ the growth rate of aggregate demand, by ________ money growth, and by________ interest rates.
A) lowering; slowing; lowering
B) lowering; accelerating; raising
C) lowering; accelerating; lowering
D) raising; slowing; raising
E) lowering; slowing; raising
14) If the Fed can ________ inflation expectations, it might achieve ________ inflation without ________ the unemployment rate.
A) raise; higher; lowering
B) lower; lower; lowering
C) lower; lower; raising
D) lower; higher; lowering
E) raise; lower; raising
15) If the Fed decides that it wants to lower the unemployment rate, it ________ the growth rate of aggregate demand by ________ the growth rate of money and ________ interest rates.
A) reduces; accelerates, lowering
B) accelerates; reducing; lowering
C) accelerates; reducing; raising
D) accelerates; accelerating; lowering
E) accelerates; accelerating; raising
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