Question 1

-Consider the Phillips curve at 
,1 in Figure 9.3.
A)The economy is booming.
B)The economy is inflationary.
C)The economy is at potential output.
D)The economy is in recession.
E)Both a and b are correct.

Accepted Answer

The answer of 
-Consider the Phillips curve at 
,1 in...

Question 2

If 
,the macroeconomy is:
A)in a recession.
B)in an expansion.
C)at its potential level of output.
D)Not enough information is given.
E)none of the above

Accepted Answer

The answer of If 
,the macroeconomy is:
A)in a recession.
B)in an...

Question 3

If 
,the macroeconomy is:
A)at its potential level of output.
B)in a recession.
C)in an expansion.
D)Not enough information is given.
E)none of the above

Accepted Answer

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

Question 4

In 1980,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 __________.
A)a fall in oil prices;Volcker;raise;recession
B)an increase consumer spending;Volcker;reduce;recession
C)an increase in oil prices;Volcker;raise;recession
D)an increase in oil prices;Volcker;reduce;boom
E)a fall in oil prices;Greenspan;raise;recession

Accepted Answer

The question states that inflation was a problem in 1980, and the answer choices reflect different actions that the Federal Reserve could have taken to combat inflation. Choice C correctly identifies that the inflation was due in part to an increase in oil prices, and that the Federal Reserve, under the leadership of Paul Volcker, decided to raise interest rates in response. This led to a recession, which is a period of economic decline characterized by falling GDP and rising unemployment. None of the other answer choices accurately reflect the historical events described, making choice C the best answer.

Question 5

If 
,the macroeconomy is:
A)in an expansion.
B)at its potential level of output.
C)in a recession.
D)none of the above
E)Not enough information is given.

Accepted Answer

The answer of If 
,the macroeconomy is:
A)in an expansion.
B)at its...

Question 6

If 
,the macroeconomy is:
A)in a recession.
B)in an expansion.
C)at its potential level of output.
D)Not enough information is given.
E)none of the above

Accepted Answer

The answer of If 
,the macroeconomy is:
A)in a recession.
B)in an...

Question 7

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 8

Okun's law shows the __________ relationship between __________ and __________.
A)negative;unemployment gap;economic fluctuations
B)positive;unemployment gap;economic fluctuations
C)negative;unemployment gap;inflation
D)positive;unemployment gap;inflation
E)negative;inflation;economic fluctuations

Accepted Answer

Okun's law describes a negative relationship between the unemployment gap and economic fluctuations, indicating that as economic output increases, unemployment tends to decrease.

Question 9

If 
,the macroeconomy is:
A)in a recession.
B)in an expansion.
C)at its potential level of output.
D)Not enough information is given.
E)none of the above

Accepted Answer

The answer of If 
,the macroeconomy is:
A)in a recession.
B)in an...

Question 10

-Consider the Phillips curve at 
,2 in Figure 9.3.
A)The economy is booming.
B)The economy is inflationary.
C)The economy is in recession.
D)The economy is at potential output.
E)Not enough information is given to determine.

Accepted Answer

The answer of 
-Consider the Phillips curve at 
,2 in...

Question 11

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, there is an inverse relationship between unemployment rate and inflation rate. A negative macroeconomic shock, such as a decrease in aggregate demand, leads to a decrease in output and employment, resulting in higher unemployment. This, in turn, leads to a decrease in the inflation rate, as firms are less able to raise prices in a weak economy where there is less demand for their products. Therefore, a negative macroeconomic shock decreases the rate of inflation (choice B).

Question 12

Defining u as the unemployment rate and 
As the natural rate of unemployment,Okun's law is given by the following equation:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of Defining u as the unemployment rate and...

Question 13

According to Okun's law,if the Federal Reserve wants to reduce unemployment,it should __________ interest rates,which would __________ output.
A)reduce;reduce
B)increase;increase
C)reduce;increase
D)reduce;not change
E)not change;increase

Accepted Answer

Okun's law states that there is a negative relationship between unemployment and output, meaning that as unemployment decreases, output increases. Therefore, to reduce unemployment, the Federal Reserve should reduce interest rates, which would increase output. Option C correctly describes this relationship.

Question 14

If 
,the macroeconomy is:
A)in an expansion.
B)in a recession.
C)at its potential level of output.
D)Not enough information is given.
E)none of the above

Accepted Answer

The answer of If 
,the macroeconomy is:
A)in an expansion.
B)in a...

Question 15

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 inflation and unemployment. A positive macroeconomic shock would lead to an increase in aggregate demand, causing an increase in output and employment in the short run. However, as unemployment falls, firms will increase wages to attract workers, leading to an increase in production costs, which are then passed onto consumers in the form of higher prices. This leads to an increase in the rate of inflation. Therefore, a positive macroeconomic shock would increase the rate of inflation, as indicated by choice A.

Question 16

Taken together,the Phillips curve and Okun's law imply there is a short-term __________ relationship between __________ and inflation.
A)positive;interest rates
B)positive;unemployment
C)negative;interest rates
D)negative;unemployment
E)Not enough information is given.

Accepted Answer

The Phillips curve shows a negative relationship between unemployment and inflation, while Okun's law states that there is a negative relationship between unemployment and real GDP. Thus, combining these two concepts implies a negative relationship between unemployment and inflation, as represented in choice D.

Question 17

-Consider the Phillips curve at 
In Figure 9.3.
A)The economy is booming.
B)The economy is inflationary.
C)The economy is at its potential output.
D)The economy is in recession.
E)Not enough information is given to determine.

Accepted Answer

The answer of 
-Consider the Phillips curve at 
In Figure...

Question 18

Defining u as the unemployment rate and 
As the natural rate of unemployment,Okun's law is given by the following equation:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of Defining u as the unemployment rate and...

Question 19

In 1980,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 the __________.
A)raised;expansion;Phillips curve
B)raised;recession;Phillips curve
C)raised;recession;Okun relationship
D)decreased;recession;Phillips curve
E)decreased;expansion;Phillips curve

Accepted Answer

The Federal Reserve raised interest rates, which caused a recession. This is because of the Phillips curve, which shows the inverse relationship between unemployment and inflation. By raising interest rates, the Fed was trying to reduce inflation, but this also led to higher unemployment and a recession.

Question 20

According to Okun's law,if the Federal Reserve wants to increase unemployment,it should __________ interest rates,which would __________ output.
A)increase;increase
B)increase;reduce
C)reduce;reduce
D)reduce;not change
E)not change;increase

Accepted Answer

According to Okun's law, there is an inverse relationship between unemployment and output. To increase unemployment, the Federal Reserve needs to reduce output. By increasing interest rates, borrowing becomes more expensive and businesses are less likely to invest in new projects. This reduces output and employment levels, leading to an increase in unemployment. Therefore, the correct answer is to increase interest rates, which would reduce output. So, option B is the correct answer.

Quiz 9: An Introduction to the Short Run

-Consider the Phillips curve at ,1 in Figure 9.3.

If ,the macroeconomy is:

If ,the macroeconomy is:

In 1980,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 .

If ,the macroeconomy is:

If ,the macroeconomy is:

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

Okun's law shows the relationship between and __.

If ,the macroeconomy is:

-Consider the Phillips curve at ,2 in Figure 9.3.

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

Defining u as the unemployment rate and As the natural rate of unemployment,Okun's law is given by the following equation:

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

If ,the macroeconomy is:

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

Taken together,the Phillips curve and Okun's law imply there is a short-term relationship between and inflation.

-Consider the Phillips curve at In Figure 9.3.

Defining u as the unemployment rate and As the natural rate of unemployment,Okun's law is given by the following equation:

In 1980,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 the __.

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

Quiz 9: An Introduction to the Short Run

-Consider the Phillips curve at ,1 in Figure 9.3.

If ,the macroeconomy is:

If ,the macroeconomy is:

In 1980,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 __________.

If ,the macroeconomy is:

If ,the macroeconomy is:

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

Okun's law shows the __________ relationship between __________ and __________.

If ,the macroeconomy is:

-Consider the Phillips curve at ,2 in Figure 9.3.

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

Defining u as the unemployment rate and As the natural rate of unemployment,Okun's law is given by the following equation:

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

If ,the macroeconomy is:

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

Taken together,the Phillips curve and Okun's law imply there is a short-term __________ relationship between __________ and inflation.

-Consider the Phillips curve at In Figure 9.3.

Defining u as the unemployment rate and As the natural rate of unemployment,Okun's law is given by the following equation:

In 1980,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 the __________.

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

In 1980,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 .

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

Okun's law shows the relationship between and __.

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

Taken together,the Phillips curve and Okun's law imply there is a short-term relationship between and inflation.

In 1980,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 the __.

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