Question : 101) A contractionary monetary policy that has been imposed to : 1384487

101) A contractionary monetary policy that has been imposed to reduce inflation will most likely

A) have no effect on the short-run level of GDP and unemployment.

B) not control inflation, since money supply changes have little or no effect on the price level.

C) produce long-lasting unemployment if wages adjust rapidly.

D) lead to a recession that is long and severe, under any circumstances.

E) lead to a recession which will be short if inflation expectations adjust rapidly and accurately.

102) It is difficult for the Bank of Canada to remove a sustained inflation without producing stagflation because inflationary expectations cause the

A) AD curve to shift too far to the right.

B) AD curve to shift too far to the left.

C) AS curve to continue shifting upward.

D) AS curve to continue shifting downward.

E) AD curve to continue shifting to the right.

103) The reason why stagflation can occur when the Bank of Canada attempts to remove a sustained inflation is that inflationary expectations cause the

A) AD curve to shift too far to the right.

B) AD curve to shift too far to the left.

C) AS curve to continue shifting downward.

D) AS curve to continue shifting upward.

E) AD curve to continue shifting to the right.

104) One of the results of the restrictive monetary policy adopted by the Bank of Canada in the early 1980s was that

A) inflation fell dramatically and real GDP remained at full employment levels.

B) inflation fell dramatically, but was accompanied by a major recession.

C) inflation remained over 10%, but the Bank of Canada avoided a major recession.

D) inflation remained over 10% and there was a major recession.

E) unemployment fell, but inflation accelerated due to higher interest rates.

105) Of the three phases of a disinflation, the first phase consists of the central bank

A) pursuing an expansionary monetary policy.

B) directing its monetary policy to achieve a stable exchange rate.

C) slowing the rate of monetary expansion.

D) directing its monetary policy to reduce the unemployment rate.

E) directing its monetary policy to reduce the overnight interest rate.

106) Of the three phases involved in the elimination of a sustained inflation in Canada, the second phase is characterized by

A) the Bank of Canada pursuing an expansionary monetary policy.

B) stagflation with falling output and continuing inflation.

C) the Bank of Canada increasing the rate of monetary expansion.

D) aggregate output being returned to potential output.

E) increased inflation with rising output and falling unemployment.

107) If a central bank is to successfully end a sustained inflation, it is essential that it

A) avoid any loss in national income.

B) do so using a “cold-turkey” approach.

C) change people’s expectations of future inflation.

D) maintain the sacrifice ratio at a constant level.

E) avoid any increase in unemployment.

108) The process of disinflation can involve some period of increased inflation and reduced output. Economists refer to this as

A) the sacrifice period.

B) monetary validation.

C) the recovery phase.

D) an inflationary recession.

E) stagflation.

109) Suppose we know the following information about a hypothetical economy:

A) unemployment will rise further beyond the NAIRU.

B) unemployment will fall below NAIRU.

C) the interest rate and the inflation rate will both rise and unemployment will fall.

D) the interest rate and the inflation rate will both fall and unemployment will rise.

E) all real variables will remain unchanged.

110) A measure that has been developed to analyze the amount of output that must be given up in order to reduce the inflation rate by one percentage point is called the

A) misery index.

B) Phillips measure.

C) credibility index.

D) output gap.

E) sacrifice ratio.