Question 1

The Phillips curve in the text shows the ________ relationship between ________ and ________.
A) positive; the change in inflation; short-term economic fluctuations
B) negative; the change in inflation; short-term economic fluctuations
C) positive; inflation; unemployment
D) negative; inflation; unemployment
E) negative; the change in inflation; unemployment

Accepted Answer

The answer of The Phillips curve in the text shows...

Question 2

Generally speaking, the rate of inflation ________ during a recession.
A) stays the same
B) falls
C) rises
D) falls, then rises
E) None of these answers is correct.

Accepted Answer

During a recession, the economy slows down and consumption decreases. In turn, this causes a decrease in demand for goods and services, which puts downward pressure on prices. This leads to a fall in the rate of inflation.

Question 3

According to the Phillips curve presented in the text, a positive macroeconomic shock:
A) increases the rate of inflation.
B) decreases the rate of inflation.
C) has no effect on the rate of inflation.
D) has a negative effect on the unemployment rate.
E) has a positive effect on the unemployment rate.

Accepted Answer

According to the Phillips curve, there is an inverse relationship between unemployment and inflation. This means that when unemployment is high, inflation is low and vice versa. Therefore, a positive macroeconomic shock, which typically leads to lower unemployment, will lead to higher inflation according to the Phillips curve.

Question 4

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 ________.
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

Accepted Answer

The Federal Reserve raised interest rates, which led to a recession. This is known as contractionary monetary policy, which was implemented to combat the high inflation rate of 14 percent in 1979. The Phillips curve shows the inverse relationship between inflation and unemployment, but it does not directly explain the Federal Reserve's decision to raise interest rates. Okun's law is also not directly related to this situation.

Question 5

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

Accepted Answer

The answer of Refer to the following figure when answering...

Question 6

When the U.S. economy bottomed out during the Great Depression, the unemployment rate hit about ________ percent in ________.
A) 9; 1977
B) 10; 1929
C) 25; 1933
D) 10; 2010
E) 10.5; 1982

Accepted Answer

The unemployment rate hit about 25% in 1933 during the Great Depression.

Question 7

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

Accepted Answer

The answer of If  , the macroeconomy is:
A) at...

Question 8

The Phillips curve in the text shows the ________ relationship between ________ and ________.
A) positive; inflation; unemployment
B) positive; inflation; short-term economic fluctuations
C) positive; the change in inflation; short-term economic fluctuations
D) negative; inflation; unemployment
E) negative; the change in inflation; unemployment

Accepted Answer

The answer of The Phillips curve in the text shows...

Question 9

The short-run model is built on which of the following?
i. The economy is constantly being hit by so-called shocks.
ii. Economic policy has no impact on output.
iii. There is trade-off between output and inflation.
A) i only
B) i and iii
C) ii and iii
D) ii only
E) i, ii, and iii

Accepted Answer

The short-run model is built on the assumption that the economy is constantly being hit by so-called shocks (i) and there is a trade-off between output and inflation (iii). However, it does not assume that economic policy has no impact on output (ii). Therefore, the best choice is B.

Question 10

If  , the macroeconomy is:
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.

Accepted Answer

The presence of a negative output gap (TB6622_11) indicates that the macroeconomy is currently below its potential level of output, which implies that the economy is experiencing a recessionary gap.

Question 11

Refer to the following figure to answer the following questions.
Figure 9.3: Percent Change in U.S. Employment: 1980-2015 
-Based on the data presented in Figure 9.3, which of the following periods is/are likely (an) expansion(s)?
A) 1988, 2006, and 2014
B) 1988 and 2014
C) 1981, 1990, and 2001
D) 2002
E) Not enough information is given.

Accepted Answer

Expansion periods in an economy are typically characterized by growth in GDP, decrease in unemployment rates, and overall positive economic indicators. Without seeing Figure 9.3, the correct answer cannot be determined definitively. However, given the typical pattern of economic cycles and assuming the years mentioned in option A are characterized by such positive indicators, it would suggest these are periods of economic expansion.

Question 12

The Great Depression stimulated ________ to write ________, which is considered to be the birth of modern macroeconomics.
A) John Hicks; Value and Capital
B) Karl Marx; Das Kapital
C) David Ricardo; Principles of Political Economy and Taxation
D) Milton Friedman and Anna J. Schwartz; A Monetary History of the United States, 1867-1960
E) John Maynard Keyes; The General Theory of Employment, Interest, and Money

Accepted Answer

The Great Depression stimulated John Maynard Keynes to write The General Theory of Employment, Interest, and Money, which is considered to be the birth of modern macroeconomics.

Question 13

Refer to the following figure when answering the following questions.
Figure 9.4: Phillips Curve 
-Consider the Phillips curve at  in Figure 9.4. Which of the following is true?
A)The economy is booming.
B)The economy is deflationary.
C)The economy is at potential output.
D)The economy is in recession.
E)Unemployment is above the natural level.

Accepted Answer

The answer of Refer to the following figure when answering...

Question 14

If  , the macroeconomy is:
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.

Accepted Answer

The answer of If  , the macroeconomy is:
A) in...

Question 15

If  , the macroeconomy is:
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.

Accepted Answer

The answer of If  , the macroeconomy is:
A) in...

Question 16

According to the Phillips curve presented in the text, a negative macroeconomic shock:
A) increases the rate of inflation.
B) decreases the rate of inflation.
C) has no effect on the rate of inflation.
D) has a negative effect on the unemployment rate.
E) has a positive effect on the unemployment rate.

Accepted Answer

According to the Phillips curve presented in the text, there is an inverse relationship between unemployment and inflation. When unemployment is low, inflation tends to be high, and when unemployment is high, inflation tends to be low. Therefore, a negative macroeconomic shock, such as a decrease in aggregate demand or an increase in oil prices, would lead to an increase in unemployment and a decrease in aggregate output. This, in turn, would lead to a decrease in inflation or a deflationary pressure. Therefore, the best choice is B, which says that a negative macroeconomic shock decreases the rate of inflation.

Question 17

If  , the macroeconomy is:
A) in a recession.
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.

Accepted Answer

The answer of If  , the macroeconomy is:
A) in...

Question 18

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

Accepted Answer

The point on the Phillips curve is to the left of the vertical line at potential output, indicating that the economy is experiencing a recessionary gap, where output is below potential and there is likely to be downward pressure on prices.

Question 19

Refer to the following figure to answer the following questions.
Figure 9.3: Percent Change in U.S. Employment: 1980-2015 
-Based on the data presented in Figure 9.3, which of the following periods is/are likely (a) recession(s)?
A) 1984, 1988, and 2006
B) 1988 and 2014
C) 1983, 1990, and 2001
D) 2005
E) Not enough information is given.

Accepted Answer

The periods of recession are identified as those with negative percent change in employment. Based on the data in the graph, 1983, 1990, and 2001 show negative percent change in employment.

Question 20

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

Accepted Answer

The answer of If  , the macroeconomy is:
A) in...

Quiz 9: An Introduction to the Short Run

The Phillips curve in the text shows the relationship between and .

Generally speaking, the rate of inflation ________ during a recession.

According to the Phillips curve presented in the text, a positive macroeconomic shock:

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 .

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:

When the U.S. economy bottomed out during the Great Depression, the unemployment rate hit about percent in .

If , the macroeconomy is:

The Phillips curve in the text shows the relationship between and .

The short-run model is built on which of the following? i. The economy is constantly being hit by so-called shocks. ii. Economic policy has no impact on output. iii. There is trade-off between output and inflation.

If , the macroeconomy is:

Refer to the following figure to answer the following questions. Figure 9.3: Percent Change in U.S. Employment: 1980-2015 -Based on the data presented in Figure 9.3, which of the following periods is/are likely (an) expansion(s) ?

The Great Depression stimulated to write , which is considered to be the birth of modern macroeconomics.

Refer to the following figure when answering the following questions. Figure 9.4: Phillips Curve -Consider the Phillips curve at in Figure 9.4. Which of the following is true?

If , the macroeconomy is:

If , the macroeconomy is:

According to the Phillips curve presented in the text, a negative macroeconomic shock:

If , the macroeconomy is:

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:

Refer to the following figure to answer the following questions. Figure 9.3: Percent Change in U.S. Employment: 1980-2015 -Based on the data presented in Figure 9.3, which of the following periods is/are likely (a) recession(s) ?

If , the macroeconomy is: