Question 1

Figure 35-7
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 35-7.Starting from C and 3,in the long run,an increase in money supply growth moves the economy to
A)A and 1.
B)back to C and 3.
C)D and 4.
D)F and 5.

Accepted Answer

The answer of Figure 35-7
Use the two graphs in the...

Question 2

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.If the economy starts at C and the money supply growth rate increases,then in the short run the economy moves to
A)B.
B)D.
C)F.
D)None of the above is consistent with an increase in the money supply growth rate.

Accepted Answer

An increase in the money supply growth rate would shift the aggregate demand curve to the right, leading to higher output (real GDP) and prices in the short run. This movement is represented by the shift from point C to point D on the graph. Therefore, the correct choice is B.

Question 3

Figure 35-7
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 35-7.The economy would move from 3 to 5
A)in the short run if money supply growth increased unexpectedly.
B)in the short run if money supply growth decreased unexpectedly.
C)in the long run if money supply growth increases.
D)in the long run if money supply growth decreases.

Accepted Answer

In the long run, an increase in money supply growth will lead to an increase in aggregate demand, shifting the AD curve to the right and moving the economy from point 3 to point 5.

Question 4

Figure 35-7
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 35-7.Starting from C and 3,in the short run an unexpected increase in money supply growth moves the economy to
A)A and 1.
B)B and 2.
C)back to C and 3.
D)D and 4.

Accepted Answer

The answer of Figure 35-7
Use the two graphs in the...

Question 5

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.The money supply growth rate is greatest at
A)A.
B)B.
C)C.
D)F.

Accepted Answer

The answer of Figure 35-6
Use the graph below to answer...

Question 6

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.If the economy starts at C and the money supply growth rate decreases,in the short run the economy moves to
A)B.
B)C.
C)F.
D)None of the above is consistent with a decrease in the money supply growth rate.

Accepted Answer

If the money supply growth rate decreases, it would lead to a decrease in aggregate demand, shifting the AD curve leftward. The intersection of the new AD and SRAS curve occurs at point B, indicating a decrease in both price level and output. Therefore, the economy would move from C to B in the short run.

Question 7

On a given short-run Phillips curve which of the following is not held constant?
A)the level of GDP
B)the position of the aggregate-supply curve
C)expected inflation
D)the expected growth rate of the money supply

Accepted Answer

The level of GDP is not held constant on a given short-run Phillips curve. The Phillips curve shows the relationship between inflation and unemployment, and the level of GDP can affect both of these variables.

Question 8

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.Curve 2 is the
A)long-run Phillips curve.
B)short-run Phillips curve.
C)long-run aggregate demand curve.
D)short-run aggregate demand curve.

Accepted Answer

Curve 2 is the short-run Phillips curve, which shows the inverse relationship between unemployment and inflation in the short run, based on the level of aggregate demand.

Question 9

Figure 35-7
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 35-7.The economy would move from C to B
A)in the short run if money supply growth increased unexpectedly.
B)in the short run if money supply growth decreased unexpectedly.
C)in the long run if money supply growth increases.
D)in the long run if money supply growth decreases.

Accepted Answer

The answer of Figure 35-7
Use the two graphs in the...

Question 10

On a given short-run Phillips curve which of the following is held constant?
A)the level of GDP
B)the unemployment rate
C)expected inflation
D)employment

Accepted Answer

The short-run Phillips curve shows the relationship between inflation and unemployment, holding expected inflation constant.

Question 11

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.Curve 1 is the
A)long-run aggregate supply curve.
B)short-run aggregate supply curve.
C)long-run Phillips curve.
D)short-run Phillips curve.

Accepted Answer

Curve 1 is the long-run Phillips curve, which is vertical, indicating no trade-off between inflation and unemployment in the long run.

Question 12

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?
A)7% unemployment and 1% inflation
B)7% unemployment and 3% inflation
C)3% unemployment and 5% inflation
D)3% unemployment and 7% inflation

Accepted Answer

In the short run, an expansionary monetary policy can reduce unemployment and increase inflation, moving the economy to a point with lower unemployment and higher inflation, such as 3% unemployment and 5% inflation.

Question 13

Figure 35-7
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 35-7.Starting from C and 3,in the short run,an unexpected decrease in money supply growth moves the economy to
A)A and 1.
B)B and 2.
C)back to C and 3.
D)D and 4.

Accepted Answer

An unexpected decrease in money supply growth typically leads to higher interest rates, reducing aggregate demand and output, moving the economy to a lower output and price level, such as B and 2.

Question 14

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8.If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy,in the short run the economy moves to
A)3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation.
B)3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.
C)7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation.
D)7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.

Accepted Answer

The answer of Figure 35-8
Use this graph to answer the...

Question 15

Figure 35-7
Use the two graphs in the diagram to answer the following questions. 
-Refer to Figure 35-7.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to
A)A and 1.
B)back to C and 3.
C)D and 4.
D)F and 5.

Accepted Answer

According to the graph, decreasing money supply growth shifts the AD curve leftward, causing a decrease in output and price level. This ultimately leads the economy to point A and 1 in the long run.

Question 16

If the long-run Phillips curve shifts to the right,then for any given rate of money growth and inflation the economy has
A)higher unemployment and lower output.
B)higher unemployment and higher output.
C)lower unemployment and lower output.
D)lower unemployment and higher output.

Accepted Answer

If the long-run Phillips curve shifts to the right, it means that there is now a higher natural rate of unemployment (the rate of unemployment consistent with stable inflation) in the economy. This implies that for any given rate of money growth and inflation, the economy will have higher unemployment and lower output. This is because firms will need to reduce production and lay off workers in order to maintain their profit margins in the face of higher costs, due to the fact that wages are sticky in the short run.

Question 17

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8.Suppose the economy starts at 5% unemployment and 3% inflation.If the Federal Reserve pursues an expansionary monetary policy,in the short run the economy moves to
A)3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation.
B)3% unemployment and 5% inflation.In the long run the economy moves to 3% unemployment and 5% inflation.
C)7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation.
D)7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.

Accepted Answer

An expansionary monetary policy reduces unemployment in the short run, leading to higher inflation. In the long run, unemployment returns to its natural rate, but inflation remains higher.

Question 18

Figure 35-8
Use this graph to answer the questions below. 
-Refer to figure 35-8.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more contractionary monetary policy?
A)7% unemployment and 1% inflation
B)7% unemployment and 3% inflation
C)3% unemployment and 5% inflation
D)3% unemployment and 7% inflation

Accepted Answer

A more contractionary monetary policy would lead to higher interest rates and reduced aggregate demand, which would increase unemployment and decrease inflation. Moving to point A (7% unemployment and 1% inflation) reflects this outcome.

Question 19

If the long-run Phillips curve shifts to the left,then for any given rate of money growth and inflation the economy has
A)higher unemployment and lower output.
B)higher unemployment and higher output.
C)lower unemployment and lower output.
D)lower unemployment and higher output.

Accepted Answer

If the long-run Phillips curve shifts to the left, it implies that there is a lower natural rate of unemployment, meaning that the economy can achieve lower levels of unemployment without triggering higher inflation. Therefore, for any given rate of money growth and inflation, the economy would have lower unemployment and higher output, as the lower natural rate of unemployment means that firms can hire more workers without triggering inflationary pressures.

Question 20

Figure 35-6
Use the graph below to answer the following questions. 
-Refer to Figure 35-6.If the economy starts at C and the money supply growth rate increases,in the long run the economy
A)stays at C.
B)moves to B.
C)moves to F.
D)None of the above is consistent wit an increase in the money supply growth rate.

Accepted Answer

An increase in the money supply growth rate would shift the AD curve to the right, causing both output and the price level to increase in the short run. However, in the long run, the increase in the money supply growth rate would lead to an increase in inflation expectations, which would shift the SRAS curve upward. The intersection of the adjusted AD and SRAS curves is the new long-run equilibrium point, which is at point F in the graph. Therefore, the economy would move to point F in the long run.

Quiz 22: The Short Run Trade Off Between Inflation and Unemployment: Shifts in the Phillips Curve the Role of Expectations

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7.Starting from C and 3,in the long run,an increase in money supply growth moves the economy to

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.If the economy starts at C and the money supply growth rate increases,then in the short run the economy moves to

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7.The economy would move from 3 to 5

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7.Starting from C and 3,in the short run an unexpected increase in money supply growth moves the economy to

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.The money supply growth rate is greatest at

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.If the economy starts at C and the money supply growth rate decreases,in the short run the economy moves to

On a given short-run Phillips curve which of the following is not held constant?

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.Curve 2 is the

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7.The economy would move from C to B

On a given short-run Phillips curve which of the following is held constant?

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.Curve 1 is the

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7.Starting from C and 3,in the short run,an unexpected decrease in money supply growth moves the economy to

Figure 35-8 Use this graph to answer the questions below. -Refer to figure 35-8.If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy,in the short run the economy moves to

Figure 35-7 Use the two graphs in the diagram to answer the following questions. -Refer to Figure 35-7.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

If the long-run Phillips curve shifts to the right,then for any given rate of money growth and inflation the economy has

Figure 35-8 Use this graph to answer the questions below. -Refer to figure 35-8.Suppose the economy starts at 5% unemployment and 3% inflation.If the Federal Reserve pursues an expansionary monetary policy,in the short run the economy moves to

If the long-run Phillips curve shifts to the left,then for any given rate of money growth and inflation the economy has

Figure 35-6 Use the graph below to answer the following questions. -Refer to Figure 35-6.If the economy starts at C and the money supply growth rate increases,in the long run the economy