Deck 35: True False

Question 1

A policy change that reduces the natural rate of unemployment shifts both the long-run aggregate-supply curve and the long-run Phillips curve left.

Answer 1

False

Question 2

Other things the same,an increase in aggregate demand reduces unemployment and raises inflation in the short run.

Answer 2

True

Question 3

Although monetary policy cannot reduce the natural rate of unemployment,other types of government policies can.

Answer 3

True

Question 4

The logic behind the tradeoff between inflation and unemployment is that high aggregate demand puts upward pressure on wages and prices while raising output.

Question 5

The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.

Question 6

Fiscal policy cannot be used to move the economy along the short-run Phillips curve.

Question 7

The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Question 8

Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes.

Question 9

If monetary policy moves unemployment below its natural rate,both expected and actual inflation will rise.

Question 10

Friedman and Phelps believed that the natural rate of unemployment was constant.

Question 11

If the Fed were to increase the money supply,inflation would increase and unemployment would decrease in the short run.

Question 12

In the long run,the inflation rate depends primarily on the growth rate of the money supply.

Question 13

Short-run outcomes in the economy can be expressed in terms of output and the price level,or in terms of unemployment and inflation.

Question 14

In the long run,the natural rate of unemployment depends primarily on the growth rate of the money supply.

Question 15

The short-run Phillips curve is based on the classical dichotomy.

Question 16

A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.

Question 17

Other things the same,a decrease in aggregate demand decreases both inflation and unemployment.

Question 18

Neither monetary policy nor any government policy can change the natural rate of unemployment.

Question 19

The short-run Phillips curve indicates that expansionary monetary policy will temporarily raise the unemployment rate above its natural rate.

Question 20

Unexpectedly high inflation reduces unemployment in the short run,but as inflation expectations adjust the unemployment rate returns to its natural rate.

Question 21

An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.

Question 22

According to the Friedman-Phelps analysis,in the long run actual inflation equals expected inflation and unemployment is at its natural rate.

Question 23

An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.

Question 24

In most of the 1970s,the Fed's policy created expectations of high inflation.

Question 25

In the Friedman-Phelps analysis,when inflation is less than expected,the unemployment rate is less than the natural rate.

Question 26

A decrease in government expenditures serves as an example of an adverse supply shock.

Question 27

An adverse supply shock shifts the short-run Phillips curve right.If people raise their inflation expectations,the short-run Phillips curve shifts farther right.

Question 28

The natural rate of unemployment is the same as the socially optimal rate of unemployment.

Question 29

An adverse supply shock shifts the short-run Phillips curve to the left.

Question 30

An increase in the natural rate of unemployment shifts the long-run Phillips curve to the right.

Question 31

The proliferation of Internet usage serves as an example of a favorable supply shock.

Question 32

Other things the same,if the Fed increases the rate at which it increases the money supply then the short-run Phillips curve shifts right in the long run.

Question 33

A rightward shift of the short-run aggregate-supply curve results in a more favorable trade-off between inflation and unemployment.

Question 34

Just as the aggregate-demand curve slopes downward only in the short run,the trade-off between inflation and unemployment holds only in the long run.

Question 35

In the long run people come to expect whatever inflation rate the Fed chooses to produce,so unemployment returns to its natural rate.

Question 36

Just as the aggregate-supply curve slopes upward only in the short run,the trade-off between inflation and unemployment holds only in the short run.

Question 37

An increase in the inflation rate permanently reduces the natural rate of unemployment.

Question 38

If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products,then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

Question 39

A central bank announces it will decrease the inflation rate by 10 percentage points.People are skeptical of the announcement,but do expect the central bank will reduce inflation by 5 percentage points and so expected inflation falls by 5 percentage points.If the central bank decreases inflation by only 3 percentage points then the unemployment rate will fall.

Question 40

The analysis of Friedman and Phelps argues that an expected change in inflation has no impact on the unemployment rate.

Question 41

If expected inflation increases,the short-run Phillips curve will shift to the left so that inflation will be higher at any given unemployment rate.

Question 42

A decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.

Question 43

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply,then in the short run the Federal Reserve's action will raise inflation and lower unemployment.

Question 44

U.S.monetary policy in the early 1980s reduced the inflation rate by more than half.

Question 45

A central bank can reduce inflation by reducing money supply growth,but it necessarily does so at the cost of permanently raising the unemployment rate.

Question 46

According to the Phillips curve,policymakers can reduce both inflation and unemployment by increasing the money supply.

Question 47

The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.

Question 48

A low sacrifice ratio would make a central bank less willing to reduce the inflation rate.

Question 49

Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high.

Question 50

In a famous article published 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.

Question 51

If the Fed reduces inflation by 2 percentage points and this results in a 6 percentage-point increase in unemployment,then the sacrifice ratio is equal to 3.

Question 52

The sacrifice ratio is the percentage point increase in the unemployment rate created in the process of reducing inflation by one percentage point.