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49. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth
rate moves the economy to
a.
A and 1
b.
B and 2
c.
C and 3
d.
None of the above is correct.
50. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures
moves the economy to
a.
B and 2.
b.
B and 3.
c.
B and 3.
d.
None of the above is correct.
51. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in taxes moves the economy
to
a.
D and 2.
b.
D and 3.
c.
back to C and 1.
d.
None of the above is correct.
52. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in aggregate demand moves
the economy to
a.
A and 2.
b.
D and 3.
c.
E and 3.
d.
None of the above is correct.
53. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in the money supply moves
the economy to
a.
E and 1.
b.
D and 2.
c.
D and 3.
d.
None of the above is correct.
54. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, a decrease in government expenditures
moves the economy to
a.
D and 2
b.
D and 3.
c.
E and 3.
d.
None of the above is correct.
55. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in taxes moves the economy
to
a.
B and 2.
b.
D and 3.
c.
E and 2.
d.
None of the above is correct.
Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD)
curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment
rate.
56. Refer to Figure 35-3. What is measured along the vertical axis of the left-hand graph?
a.
the wage rate
b.
the inflation rate
c.
the price level
d.
the change in output from one year to the next
57. Refer to Figure 35-3. What is measured along the vertical axis of the right-hand graph?
a.
the interest rate
b.
the inflation rate
c.
the government’s budget deficit as a percent of GDP
d.
the growth rate of the nominal money supply
58. Refer to Figure 35-3. Assume the figure depicts possible outcomes for the year 2018. In 2018, the economy is at
point A on the left-hand graph, which corresponds to point A on the right-hand graph. The price level in the year 2017
was
a.
144.
b.
150.
c.
152.
d.
156.
59. Refer to Figure 35-3. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point
B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph
corresponds to A on the right-hand graph. The price level in the year 2018 is
a.
155.56.
b.
159.00.
c.
163.50.
d.
170.04.
Figure 35-4. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD)
curves. On the left-hand diagram, the price level is measured on the vertical axis; on the right-hand diagram, the inflation
rate is measured on the vertical axis.
60. Refer to Figure 35-4. What is measured along the horizontal axis of the left-hand graph?
a.
the wage rate
b.
the inflation rate
c.
output
d.
the interest rate
61. Refer to Figure 35-4. What is measured along the horizontal axis of the right-hand graph?
a.
the interest rate
b.
the price level
c.
the government’s budget deficit as a percent of GDP
d.
the unemployment rate
62. Refer to Figure 35-4. Assume the figure depicts possible outcomes for the year 2018. In 2018, the economy is at
point A on the left-hand graph, which corresponds to point A on the right-hand graph. The price level in the year 2017
was
a.
106.
b.
108.
c.
110.
d.
112.
63. Refer to Figure 35-4. Assume the figure charts possible outcomes for the year 2018. In 2018, the economy is at point
B on the left-hand graph, which corresponds to point B on the right-hand graph. Also, point A on the left-hand graph
corresponds to A on the right-hand graph. The price level in the year 2018 is
a.
117.25.
b.
114.95.
c.
113.12.
d.
111.10.
64. As the aggregate demand curve shifts leftward along a given aggregate supply curve,
a.
unemployment and inflation are higher.
b.
unemployment and inflation are lower.
c.
unemployment is higher and inflation is lower.
d.
unemployment is lower and inflation is higher.
65. As the aggregate demand curve shifts rightward along a given aggregate supply curve,
a.
unemployment and inflation are higher.
b.
unemployment and inflation are lower.
c.
unemployment is higher and inflation is lower.
d.
unemployment is lower and inflation is higher.
66. From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run
Phillips curve this policy should have
a.
raised inflation and unemployment.
b.
raised inflation and reduced unemployment.
c.
reduced inflation and raised unemployment.
d.
reduced inflation and unemployment.
67. In 2009 Congress and President Obama approved tax cuts and increased government spending. According to the short-
run Phillips curve these policies should have
a.
raised unemployment and inflation.
b.
raised unemployment and reduced inflation.
c.
reduced unemployment and raised inflation.
d.
reduced unemployment and inflation.
68. In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and
unemployment rose.
a.
The change in inflation, but not the change in unemployment is consistent with what a given short-run Phillips
curve implies.
b.
The change in unemployment, but not the change in inflation is consistent with what a given short-run Phillips
curve implies.
c.
Both the change in inflation and the change in unemployment are consistent with what a given short-run
Phillips curve implies.
d.
Neither the change in inflation nor the change in unemployment are consistent with what a given short-run
Phillips curve implies.
69. According to the short-run Phillips curve, inflation
a.
and unemployment would fall if the policymakers decreased the money supply.
b.
would fall and unemployment would rise if policymakers decreased the money supply.
c.
and unemployment would fall if the policymakers increased the money supply.
d.
would fall and unemployment would rise if policymakers increased the money supply.
70. When aggregate demand shifts left along the short-run aggregate supply curve,
a.
unemployment and prices rise.
b.
unemployment rises and prices fall.
c.
unemployment falls and prices rise.
d.
unemployment and prices fall.
71. During the financial crisis Congress and President Obama authorized tax cuts and increases in government spending.
According to the Phillips curve, in the short run these policies should have
a.
reduced inflation and unemployment.
b.
raised inflation and unemployment.
c.
reduced inflation and raised unemployment.
d.
raised inflation and reduced unemployment.
72. If the central bank increases the money supply, in the short run, the price level
a.
and unemployment rise.
b.
rises and unemployment falls.
c.
falls and unemployment rises.
d.
and unemployment fall.
73. If the central bank decreases the money supply, then output
a.
and unemployment rises.
b.
rises and unemployment falls.
c.
falls and unemployment rises.
d.
and unemployment falls.
74. As aggregate demand shifts left along the short-run aggregate supply curve,
a.
inflation and unemployment are higher.
b.
inflation is higher and unemployment is lower.
c.
unemployment is higher and inflation is lower.
d.
unemployment and inflation are lower.
75. If consumption expenditures fall, then in the short run
a.
inflation and unemployment rise.
b.
inflation rises and unemployment falls.
c.
inflation falls and unemployment rises.
d.
inflation and unemployment fall.
76. Which of the following would we not expect if government policy moves the economy up along a given short-run
Phillips curve?
a.
Mark gets an increase in his nominal wage.
b.
Bob gets more job offers.
c.
Susan reduces prices at her pizza restaurant.
d.
Tom reads that the central bank recently raised the money supply
77. Other things constant, which of the following would reduce unemployment and raise inflation?
a.
businesses become more optimistic about the future of the economy
b.
because of high growth abroad, net exports rise
c.
the government cuts taxes
d.
All of the above are correct.
78. If more firms chose to pay efficiency wages, which of the following would shift to the right?
a.
both the long-run Phillips curve and the long-run aggregate supply curve
b.
the long-run Phillips curve but not the long-run aggregate supply curve
c.
the long-run aggregate supply curve but not the long-run Phillips curve
d.
neither the long-run Phillips curve nor the long-run aggregate supply curve
79. If consumer confidence rises, then aggregate demand shifts
a.
right, making inflation higher than otherwise.
b.
right, making inflation lower than otherwise.
c.
left, making inflation higher than otherwise.
d.
left, making inflation lower than otherwise.
80. If taxes rise, then aggregate demand shifts
a.
right, making unemployment higher than otherwise.
b.
right, making unemployment lower than otherwise.
c.
left, making unemployment higher than otherwise.
d.
left, making unemployment lower than otherwise.
81. Which of the following increases inflation and reduces unemployment in the short run?
a.
either an increase in government expenditures by itself or an increase in the money supply growth rate by itself
b.
an increase in government expenditures, but not an increase in the money supply growth rate
c.
an increase in the money supply growth rate, but not an increase in government expenditures
d.
neither an increase in government expenditures nor an increase in the money supply
82. Samuelson and Solow argued that
a.
high unemployment puts upward pressures on wages and prices.
b.
given the historical evidence, a combination of low inflation and low unemployment was not possible.
c.
Both A and B are correct.
d.
None of the above are correct.
83. If consumer confidence falls, then aggregate demand shifts
a.
right, raising the inflation rate above its previous level.
b.
right, lowering the inflation rate below its previous level.
c.
left, raising the inflation rate above its previous level.
d.
left, lowering the inflation rate below its previous level.
84. Suppose Americans become concerned about saving for retirement and, as a result, reduce their current consumption
expenditures. Which of the following would you expect to occur as a result of this change?
a.
In the short run, unemployment will increase and inflation will fall.
b.
In the short run, unemployment will increase and inflation will rise.
c.
In the short run, unemployment will decrease and inflation will rise.
d.
In the short run, unemployment will decrease and inflation will fall.
85. Suppose that as a result of a stock market boom, consumers become less concerned about saving for retirement and
increase their current consumption expenditures. Which of the following would you expect to occur as a result of this
change?
a.
In the short run, unemployment will increase and inflation will fall.
b.
In the short run, unemployment will increase and inflation will rise.
c.
In the short run, unemployment will decrease and inflation will rise.
d.
In the short run, unemployment will decrease and inflation will fall.
86. Suppose Congress passes an investment tax credit that increases the quantity of investment goods that firms demand at
any given interest rate. Which of the following would you expect to occur as a result of this change?
a.
In the short run, unemployment will increase and inflation will fall.
b.
In the short run, unemployment will increase and inflation will rise.
c.
In the short run, unemployment will decrease and inflation will rise.
d.
In the short run, unemployment will decrease and inflation will fall.
87. Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect
to occur in the U.S. as a result of this change?
a.
In the short run, unemployment will increase and inflation will fall.
b.
In the short run, unemployment will increase and inflation will rise.
c.
In the short run, unemployment will decrease and inflation will rise.
d.
In the short run, unemployment will decrease and inflation will fall.
88. Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which
of the following would you expect to occur as a result of this change?
a.
The economy will move up and to the left along the short-run Phillips Curve.
b.
The economy will move down and to the right along the short-run Phillips Curve.
c.
The short-run Phillips Curve will shift to the left.
d.
The short-run Phillips Curve will shift to the right.
89. Suppose a middle-class tax cut increases consumption expenditures. Which of the following would you expect to
occur as a result of this change?
a.
The economy will move up and to the left along the short-run Phillips Curve.
b.
The economy will move down and to the right along the short-run Phillips Curve.
c.
The short-run Phillips Curve will shift to the left.
d.
The short-run Phillips Curve will shift to the right.
