Question 1

Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, the change in ________ would increase less in Economy ________.

Accepted Answer

A)   inflation; 2
B)   unemployment; 1
C)   unemployment; 2
D)   interest rates; 1
E)   Not enough information is given.

Question 2

In 1979, the inflation rate reached about 14 percent. The Federal Reserve ________ interest rates, sending the economy into a(n)  ________. When doing so, the Federal Reserve knew this would be the case because of ________.

Accepted Answer

A)   raised; expansion; the Phillips curve
B)   raised; recession; the Phillips curve
C)   raised; recession; Okun's law
D)   lowered; recession; the Phillips curve
E)   lowered; expansion; the Phillips curve

Question 3

What three premises does the short-run model operate under?

Accepted Answer

The three premises are as follows:
(a) t...

Question 4

If  , the macroeconomy is:

Accepted Answer

A)   in an expansionary gap.
B)   at its potential level of output.
C)   in a recessionary gap.
D)   None of these answers is correct.
E)   Not enough information is given.

Question 5

The Board of Governors of the Federal Reserve is responsible for dating business cycles.

Accepted Answer

A) True 
 B)False

Question 6

What is the best definition of the short term in the short-term model?

Accepted Answer

A)   about two years
B)   the amount of time the economy spends at its potential output
C)   the length of time for short-term deviations to return to their long-run values
D)   the length of a recession
E)   There is no such thing as the short term.

Question 7

The long-run model determines ________ output and ________, while the short-run model determines ________ and ________ inflation.

Accepted Answer

A)   potential; long-run inflation; current output; current
B)   potential; unemployment; current output; long-run
C)   current; long-run inflation; unemployment; current
D)   potential; unemployment; unemployment; current
E)   current; unemployment; potential output; current

Question 8

You are a staff economist with the Federal Reserve. The chairman says to you, "The rate of change in inflation is too high, and I don't think the Phillips curve is very steep. What should we do to reduce these inflationary increases?" How do you respond?

Accepted Answer

A)   "Because the Phillips curve is relatively flat, we need to increase interest rates a lot, as the change in inflation is not very responsive to changes in output."
B)   "Because the Phillips curve is relatively flat, we need to decrease interest rates a lot, as the change in inflation is not very responsive to changes in output."
C)   "Because the Phillips curve is relatively flat, we need to increase interest rates only a little, as the change in inflation is very responsive to changes in output."
D)   "Because the Phillips curve is relatively flat, we need to increase interest rates only a little, as the change in inflation is not very responsive to changes in output."
E)   "Because the Phillips curve is relatively flat, we can do nothing to interest rates, as the change in inflation does not respond to changes in output."

Question 9

Refer to the following figure when answering the following questions.
Figure 9.2: U.S. Output Fluctuations 1960-2015  
-Consider Figure 9.2. In 1989, the U.S. economy experienced an economic ________, and current output was about ________ percent above potential output.

Accepted Answer

A)   boom; 1
B)   recession; 1
C)   boom; 2
D)   This cannot be determined from the information given.
E)   None of these answers is correct.

Question 10

If  , the macroeconomy is:

Accepted Answer

A)   in a recessionary gap.
B)   in an expansionary gap.
C)   at its potential level of output.
D)   Not enough information is given.
E)   None of these answers is correct.

Question 11

According to the text, the slope of the Phillips curve in the United States is about -1/3.

Accepted Answer

A) True 
 B)False

Question 12

According to the text, which of the following can be used to characterize potential output?
i. Assume a perfectly smooth trend is passing through the quarter-to-quarter movements in the real GDP.
ii. Take averages of the surrounding actual GDP numbers.
iii. Gather current data from statistical agencies, such as the Bureau of Economic Analysis.

Accepted Answer

A)   i only
B)   ii only
C)   ii and iii
D)   i and ii
E)   iii only

Question 13

In 1979, the inflation rate reached about 14 percent, due in part to ________. The Board of Governors of the Federal Reserve under ________ decided to ________ interest rates, sending the economy into a ________.

Accepted Answer

A)   a fall in oil prices; Volcker; raise; recession
B)   an increase in consumer spending; Volcker; lower; recession
C)   an increase in oil prices; Volcker; raise; recession
D)   an increase in oil prices; Volcker; lower; boom
E)   a fall in oil prices; Greenspan; raise; recession

Question 14

Refer to the following figure when answering the following questions.
Figure 9.4: Phillips Curve 
-Consider the Phillips curve at  in Figure 9.4. The economy is:

Accepted Answer

A)  booming.
B)  inflationary.
C)  in recessionary gap.
D)  at potential output.
E)  Not enough information is given to determine.

Question 15

Which of the following is NOT an example of a short-term macroeconomic shock?

Accepted Answer

A)   increased oil prices
B)   a drought
C)   increased military spending
D)   a change in the tax code
E)   None of these answers is correct.

Question 16

Defining  
as current output,  
as potential output, and  
as short-run fluctuations, the relationship between the three can be written as  
.

Accepted Answer

A) True 
 B)False

Question 17

Post-World War II, the deepest recessionary gap occurred during the Volcker-Reagan recession in the early 1980s.

Accepted Answer

A) True 
 B)False

Question 18

Taken together, the Phillips curve and Okun's law imply there is a ________ relationship between ________ and unemployment.

Accepted Answer

A)   positive; inflation
B)   negative; inflation
C)   negative; interest rates
D)   positive; interest rates
E)   Not enough information is given.

Question 19

When current output rises above potential output, we hire fewer workers, which reduces the costs of production. The change in inflation will be negative.

Accepted Answer

A) True 
 B)False

Question 20

According to Okun's law, if the Federal Reserve wants to increase unemployment, it should ________ interest rates, which would ________ output.

Accepted Answer

A)   increase; increase
B)   increase; reduce
C)   reduce; reduce
D)   reduce; not change
E)   not change; increase

Exam 9: An Introduction to the Short Run

Which of the following is NOT an example of a short-term macroeconomic shock?

Correct Answer
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According to Okun's law, if the Federal Reserve wants to increase unemployment, it should interest rates, which would output.

Correct Answer
verified

Defining as current output, as potential output, and as short-run fluctuations, the relationship between the three can be written as .

Correct Answer
verified

Refer to the following figure when answering the following questions. Figure 9.2: U.S. Output Fluctuations 1960-2015 -Consider Figure 9.2. In 1989, the U.S. economy experienced an economic , and current output was about percent above potential output.

Correct Answer
verified

If , the macroeconomy is:

Correct Answer
verified

When current output rises above potential output, we hire fewer workers, which reduces the costs of production. The change in inflation will be negative.

Correct Answer
verified

Taken together, the Phillips curve and Okun's law imply there is a relationship between and unemployment.

Correct Answer
verified

In 1979, the inflation rate reached about 14 percent. The Federal Reserve interest rates, sending the economy into a(n) . When doing so, the Federal Reserve knew this would be the case because of .

Correct Answer
verified

You are a staff economist with the Federal Reserve. The chairman says to you, "The rate of change in inflation is too high, and I don't think the Phillips curve is very steep. What should we do to reduce these inflationary increases?" How do you respond?

Correct Answer
verified

According to the text, the slope of the Phillips curve in the United States is about -1/3.

Correct Answer
verified

Post-World War II, the deepest recessionary gap occurred during the Volcker-Reagan recession in the early 1980s.

Correct Answer
verified

In 1979, the inflation rate reached about 14 percent, due in part to . The Board of Governors of the Federal Reserve under decided to interest rates, sending the economy into a .

Correct Answer
verified

Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, the change in would increase less in Economy .

Correct Answer
verified

Refer to the following figure when answering the following questions. Figure 9.4: Phillips Curve -Consider the Phillips curve at in Figure 9.4. The economy is:

Correct Answer
verified

Correct Answer
verified

The long-run model determines output and , while the short-run model determines and inflation.

Correct Answer
verified

What three premises does the short-run model operate under?

Correct Answer
verified
The three premises are as follows:
(a) t...
View Answer

The Board of Governors of the Federal Reserve is responsible for dating business cycles.

Correct Answer
verified

What is the best definition of the short term in the short-term model?

Correct Answer
verified

If , the macroeconomy is:

Correct Answer
verified

Exam 9: An Introduction to the Short Run

Which of the following is NOT an example of a short-term macroeconomic shock?

Correct AnswerverifiedShow Answer

According to Okun's law, if the Federal Reserve wants to increase unemployment, it should ________ interest rates, which would ________ output.

Correct AnswerverifiedShow Answer

Defining as current output, as potential output, and as short-run fluctuations, the relationship between the three can be written as .

Correct AnswerverifiedShow Answer

Refer to the following figure when answering the following questions. Figure 9.2: U.S. Output Fluctuations 1960-2015 -Consider Figure 9.2. In 1989, the U.S. economy experienced an economic ________, and current output was about ________ percent above potential output.

Correct AnswerverifiedShow Answer

If , the macroeconomy is:

Correct AnswerverifiedShow Answer

When current output rises above potential output, we hire fewer workers, which reduces the costs of production. The change in inflation will be negative.

Correct AnswerverifiedShow Answer

Taken together, the Phillips curve and Okun's law imply there is a ________ relationship between ________ and unemployment.

Correct AnswerverifiedShow Answer

In 1979, the inflation rate reached about 14 percent. The Federal Reserve ________ interest rates, sending the economy into a(n) ________. When doing so, the Federal Reserve knew this would be the case because of ________.

Correct AnswerverifiedShow Answer

You are a staff economist with the Federal Reserve. The chairman says to you, "The rate of change in inflation is too high, and I don't think the Phillips curve is very steep. What should we do to reduce these inflationary increases?" How do you respond?

Correct AnswerverifiedShow Answer

According to the text, the slope of the Phillips curve in the United States is about -1/3.

Correct AnswerverifiedShow Answer

Post-World War II, the deepest recessionary gap occurred during the Volcker-Reagan recession in the early 1980s.

Correct AnswerverifiedShow Answer

In 1979, the inflation rate reached about 14 percent, due in part to ________. The Board of Governors of the Federal Reserve under ________ decided to ________ interest rates, sending the economy into a ________.

Correct AnswerverifiedShow Answer

Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, the change in ________ would increase less in Economy ________.

Correct AnswerverifiedShow Answer

Refer to the following figure when answering the following questions. Figure 9.4: Phillips Curve -Consider the Phillips curve at in Figure 9.4. The economy is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The long-run model determines ________ output and ________, while the short-run model determines ________ and ________ inflation.

Correct AnswerverifiedShow Answer

What three premises does the short-run model operate under?

Correct AnswerverifiedThe three premises are as follows:(a) t...View AnswerShow Answer

The Board of Governors of the Federal Reserve is responsible for dating business cycles.

Correct AnswerverifiedShow Answer

What is the best definition of the short term in the short-term model?

Correct AnswerverifiedShow Answer

If , the macroeconomy is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

According to Okun's law, if the Federal Reserve wants to increase unemployment, it should interest rates, which would output.

Correct Answer
verified

Correct Answer
verified

Refer to the following figure when answering the following questions. Figure 9.2: U.S. Output Fluctuations 1960-2015 -Consider Figure 9.2. In 1989, the U.S. economy experienced an economic , and current output was about percent above potential output.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Taken together, the Phillips curve and Okun's law imply there is a relationship between and unemployment.

Correct Answer
verified

In 1979, the inflation rate reached about 14 percent. The Federal Reserve interest rates, sending the economy into a(n) . When doing so, the Federal Reserve knew this would be the case because of .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In 1979, the inflation rate reached about 14 percent, due in part to . The Board of Governors of the Federal Reserve under decided to interest rates, sending the economy into a .

Correct Answer
verified

Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, the change in would increase less in Economy .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The long-run model determines output and , while the short-run model determines and inflation.

Correct Answer
verified

Correct Answer
verified
The three premises are as follows:
(a) t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified