1. Closely watched indicators such as the inflation rate and unemployment are released each month by the
a.
Bureau of the Budget.
b.
Bureau of Labor Statistics.
c.
Department of the Treasury.
d.
President’s Council of Economic Advisors.
2. The misery index is calculated as the
a.
b.
c.
d.
3. The misery index is supposed to measure the
a.
social cost of unemployment.
b.
health of the economy.
c.
lost output associated with a particular unemployment rate.
d.
short-run tradeoff between inflation and unemployment.
4. One determinant of the natural rate of unemployment is the
a.
rate of growth of the money supply.
b.
minimum wage rate.
c.
expected inflation rate.
d.
All of the above are correct.
5. In the long run,
a.
the natural rate of unemployment depends primarily on the level of aggregate demand.
b.
inflation depends primarily upon the money supply growth rate.
c.
there is a tradeoff between the inflation rate and the natural rate of unemployment.
d.
All of the above are correct.
6. One determinant of the long-run average unemployment rate is the
a.
market power of unions, while the inflation rate depends primarily upon government spending.
b.
minimum wage, while the inflation rate depends primarily upon the money supply growth rate.
c.
rate of growth of the money supply, while the inflation rate depends primarily upon the market power of
unions.
d.
existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are
competitive.
7. In the long run,
a.
the natural rate of unemployment depends primarily on the level of aggregate demand.
b.
inflation depends primarily upon the money supply growth rate.
c.
there is a tradeoff between the inflation rate and the natural rate of unemployment.
d.
All of the above are correct.
8. In the long run, inflation
a.
and unemployment are primarily determined by labor market factors.
b.
and unemployment are primarily determined by the rate of money supply growth.
c.
is primarily determined by the rate of money supply growth while unemployment is primarily determined by
labor market factors.
d.
is primarily determined by labor market factors while unemployment is primarily determined by the rate of
money supply growth.
9. Which of the following statements is correct?
a.
In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated
problems.
b.
Inflation and unemployment are positively related in the short run and in the long run.
c.
In the short run, unemployment and inflation are negatively related. In the long run they are largely unrelated
problems.
d.
Inflation and unemployment are negatively related in the short run and in the long run.
10. Which of the following depends primarily on the growth rate of the money supply?
a.
inflation and the natural rate of unemployment
b.
inflation but not the natural rate of unemployment
c.
the natural rate of unemployment but not inflation
d.
neither inflation nor the natural rate of unemployment
11. A basis for the slope of the short-run Phillips curve is that when unemployment is high there are
a.
downward pressures on prices and wages.
b.
downward pressures on prices and upward pressures on wages.
c.
upward pressures on prices and downward pressures on wages.
d.
upward pressures on prices and wages.
12. In the long run, which of the following depends primarily on the growth rate of the money supply?
a.
the natural rate of unemployment and the inflation rate
b.
the natural rate of unemployment but not the inflation rate
c.
the inflation rate but not the natural rate of unemployment
d.
neither the natural rate of unemployment nor the inflation rate
13. When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the
short run?
a.
Short-run aggregate supply decreases.
b.
The natural rate of unemployment increases.
c.
The price level increases more rapidly.
d.
The money supply increases less rapidly.
14. Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short–
run consequence of this contraction?
a.
The inflation rate decreases.
b.
The level of output decreases.
c.
The unemployment rate increases.
d.
All of the above are correct.