In the long run, inflation

is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors.

and unemployment are primarily determined by labor market factors.

and unemployment are primarily determined by the rate of money supply growth.

is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.

unemployment and inflation are negatively related. In the long run they are largely unrelated problems.

unemployment and inflation are positively related. In the long run they are largely unrelated problems.

and in the long run inflation and unemployment are positively related.

and in the long run inflation and unemployment are negatively related.

Which of the following depends primarily on the growth rate of the money supply?

i nflation but not the natural rate of unemployment

i nflation and the natural rate of unemployment

the natural rate of unemployment but not inflation

neither inflation nor the natural rate of unemployment

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

downward pressures on prices and wages.

downward pressures on prices and upward pressures on wages.

upward pressures on prices and downward pressures on wages

upward pressures on prices and wages.

In the long run, which of the following depends primarily on the growth rate of the money supply?

the inflation rate but not the natural rate of unemployment

the natural rate of unemployment and the inflation rate

the natural rate of unemployment but not the inflation rate

neither the natural rate of unemployment nor the inflation rate

Phillips found a negative relation between

wage inflation and unemployment.

The economist A.W. Phillips published a famous article in 1958 in which he showed a

negative correlation between the rate of unemployment and the rate of inflation.

positive correlation between the rate of unemployment and the rate of inflation.

negative correlation between the rate of unemployment and the rate of interest.

positive correlation between the rate of unemployment and the rate of interest

negative relation between unemployment and inflation in the United Kingdom.

positive relation between unemployment and inflation in the United Kingdom.

positive relation between unemployment and inflation in the United States.

negative relation between unemployment and inflation in the United States.

A. W. Phillips' findings were based on data

from 1861-1957 for the United Kingdom

from 1861-1957 for the United States.

mostly from the post-World War II period in the United Kingdom.

mostly from the post-World War II period in the United States.

6. In his famous article published in an economics journal in 1958, A.W. Phillips

used data for the United Kingdom to show a negative relationship between the rate of change of wages in the U.K. and the U.K. unemployment rate.

used data for the United States to show a negative relationship between the rate of change of the U.S. consumer price index and the U.S. unemployment rate.

used data for the United States to show a negative relationship between the rate of change of wages in the U.S. and the U.S. unemployment rate.

used data for the United Kingdom to show a negative relationship between the rate of change of the U.K. consumer price index and the U.K. unemployment rate.

7. A.W. Phillips’s discovery of a particular relationship between unemployment and inflation for the United Kingdom

was quickly extended to other countries by researchers.

could not be extended to other countries, despite many researchers’ attempts to provide that extension.

was extended to only one other country — the United States.

was harshly criticized by the American economists Paul Samuelson and Robert Solow on the grounds that Phillips’s study was fundamentally flawed.

8. Samuelson and Solow argued that when unemployment is high, there is

downward pressures on wages and prices.

upward pressures on wages and prices.

upward pressures on wages and downward pressures on prices.

upward pressures on prices and downward pressures on wages.

9. Samuelson and Solow reasoned that when aggregate demand was high, unemployment was

low, so there was upward pressure on wages and prices.

low, so there was downward pressure on wages and prices.

high, so there was upward pressure on wages and prices.

high, so there was downward pressure on wages and prices.

10. Samuelson and Solow reasoned that when aggregate demand was low, unemployment was

high, so there was downward pressure on wages and prices.

high, so there was upward pressure on wages and prices.

low, so there was upward pressure on wages and prices.

low, so there was downward pressure on wages and prices.

11. Samuelson and Solow believed that the Phillips curve

offered policymakers a menu of possible economic outcomes from which to choose.

implied that low unemployment was associated with low inflation.

indicated that the aggregate supply and aggregate demand model was incorrect.

12. Samuelson and Solow argued that when unemployment is high,

aggregate demand is low, which puts downward pressure on wages and prices.

aggregate demand is high, which puts upward pressure on wages and prices.

aggregate demand is high, which puts downward pressure on wages and prices.

aggregate demand is low, which puts upward pressure on wages and prices.

13. Samuelson and Solow argued that a combination of low unemployment and low inflation

was impossible given the historical data as summarized by the Phillips curve.

could be achieved with an “appropriate” fiscal policy.

could be achieved with an “appropriate” monetary policy.

could be achieved with an “appropriate” mix of monetary and fiscal policies.

14. According to the Phillips curve, policymakers could reduce both inflation and unemployment by

increasing government expenditures.

15. According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

increased government expenditures.

The short-run Phillips curve shows the combinations of

unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve.

unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.

real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.

17. As aggregate demand shifts right along the aggregate supply curve,

inflation is higher and unemployment is lower.

inflation and unemployment are higher.

unemployment is higher and inflation is lower.

unemployment and inflation are lower.

18. When aggregate demand shifts right along the short-run aggregate supply curve, unemployment

falls, so there are upward pressures on wages and prices.

falls, so there are downward pressures on wages and prices.

rises, so there are upward pressures on wages and prices.

rises, so there are downward pressures on wages and prices

short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.

long-run tradeoff between inflation and unemployment.

long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.

20. In the short run, policy that changes aggregate demand changes

both unemployment and the price level.

neither unemployment nor the price level.

23. Unemployment would decrease and prices increase if

aggregate demand shifted right.

aggregate supply shifted right.

28. If a central bank decreases the money supply, then

prices and output fall and unemployment rises.

prices, output, and unemployment rise.

prices and output rise and unemployment falls.

prices rise and output and unemployment fall.

29. Suppose that the money supply increases. In the short run, this increases prices according to

both the short-run Phillips curve and the aggregate demand and aggregate supply model.

neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.

the short-run Phillips curve, but not the aggregate demand and aggregate supply model.

the aggregate demand and aggregate supply model but not the short-run Phillips curve.

30. Suppose that the money supply decreases. In the short run, this increases prices according to

neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.

both the short-run Phillips curve and the aggregate demand and aggregate supply model.

the short-run Phillips curve, but not the aggregate demand and aggregate supply model.

the aggregate demand and aggregate supply model but not the short-run Phillips curve.

31. Suppose that the money supply increases. In the short run this decreases unemployment according to

both the short-run Phillips curve and the aggregate demand and aggregate supply model.

neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.

the short-run Phillips curve, but not the aggregate demand and supply model.

the aggregate demand and aggregate supply model, but not the short-run Phillips curve.

32. In the long run, policy that changes aggregate demand changes

both unemployment and the price level.

neither unemployment nor the price level.

33. If policymakers expand aggregate demand, then in the long run

prices will be higher and unemployment will be unchanged.

prices will be higher and unemployment will be lower.

prices and unemployment will be unchanged.

34. If policymakers decrease aggregate demand, then in the long run

prices will be lower and unemployment will be unchanged.

prices will be lower and unemployment will be higher.

prices and unemployment will be unchanged.

35. In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

raised inflation and reduced unemployment.

reduced inflation and unemployment.

raised inflation and unemployment.

reduce inflation and raised unemployment.

36. According to the short-run Phillips curve, if the central bank increases the money supply, then

inflation will rise and unemployment will fall.

inflation and unemployment will both fall.

inflation and unemployment will both rise.

inflation will fall and unemployment will rise.

37. The economy will move to a point on the short-run Phillips curve where unemployment is higher if

the government increases its expenditures.

the Fed increases the money supply.

38. If the short-run Phillips curve were stable, which of the following would be unusual?

an increase in inflation and a decrease in output

an increase in government spending and a fall in unemployment

a decrease in the inflation rate and a rise in the unemployment rate

a decrease in the money supply and a rise in the unemployment rate.

39. Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Louise reads in the newspaper that the central bank recently raised the money supply.

Jack makes larger increases in the prices at his health food store.

Maria's nominal wage increase is larger.

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56 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Closely watched indicators such as the inflation rate and unemployment are released each month by the

Bureau of the Budget.

Bureau of Labor Statistics.

Department of the Treasury.

President's Council of Economic Advisors.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The misery index is calculated as the

inflation rate plus the unemployment rate

unemployment rate minus the inflation rate.

actual inflation rate minus the expected inflation rate.

natural unemployment rate times the inflation rate

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The misery index is supposed to measure the

social cost of unemployment.

health of the economy.

lost output associated with a particular unemployment rate

short-run tradeoff between inflation and unemployment

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

One determinant of the natural rate of unemployment is the

rate of growth of the money supply.

minimum wage rate

expected inflation rate.

All of the above are correct.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the long run,

the natural rate of unemployment depends primarily on the level of aggregate demand.

inflation depends primarily upon the money supply growth rate

there is a tradeoff between the inflation rate and the natural rate of unemployment

All of the above are correct.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the long run,

he natural rate of unemployment depends primarily on the level of aggregate demand

inflation depends primarily upon the money supply growth rate.

there is a tradeoff between the inflation rate and the natural rate of unemployment.

All of the above are correct.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

One determinant of the long-run average unemployment rate is the

market power of unions, while the inflation rate depends primarily upon government spending.

minimum wage, while the inflation rate depends primarily upon the money supply growth rate

rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions

existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive.

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