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Feedback: As the economy moves to the right of the long-run Phillips curve, unemployment
rises above the target rate, putting downward pressure on wages and eventually prices.
[QUESTION]
112. Inflationary pressures increase when the economy moves:
A. to the right of the long-run Phillips curve.
B. to the left of the long-run Phillips curve.
C. down the short-run Phillips curve.
D. down the long-run Phillips curve.
113. Unemployment rates above the target rate of unemployment lead to:
A. an upward shift of the short-run Phillips curve.
B. a downward shift of the short-run Phillips curve.
C. a rightward shift of the long-run Phillips curve.
D. an leftward shift of the long-run Phillips curve.
114. If the economy is at point A in the Phillips curve graph shown, what prediction would you
make for unemployment in the long run?
A. It will increase.
B. It will decrease.
C. It will remain constant.
D. It will explode.
115. If the economy is at Point A in the Phillips curve graph shown, in the long run the
unemployment would be expected to:
Long-run
Phillips curve
Inflation rate
Unemployment rate
A
Short-run PC
Long-run
Phillips curve
Inflation rate
Unemployment rate
A
Short-run PC
A. increase.
B. decrease.
C. remain constant.
D. immediately fall to zero.
116. Based on the long-run Phillips curve, we can conclude that expected inflation plays:
A. no role in determining inflation.
B. a minor role in determining inflation.
C. an important role in determining inflation.
D. an uncertain role in determining inflation.
117. Refer to the graph shown. Expectations of inflation are 2 percent at point(s):
A. A and C.
B. B.
C. D.
D. B, C, and D.
118. Refer to the graph shown. Expectations of inflation at point B are:
A. 1 percent.
B. 2 percent.
C. 3 percent.
D. unknown.
119. The short-run Phillips curve shifts around because of changes in:
A. the money supply.
B. expectations of employment.
C. expectations of inflation.
D. expectations of real income.
120. If expected inflation increases:
A. the short-run Phillips curve shifts up.
B. the short-run Phillips curve shifts down.
C. the short-run Phillips curve remains unchanged.
D. there is a movement along a short-run Phillips curve.
121. If expected inflation increases, the same level of unemployment will be associated with:
A. a higher rate of inflation.
B. a lower rate of inflation.
C. the same rate of inflation.
D. no inflation.
122. Unemployment will be at its target rate when actual inflation is:
A. 3 percent and expected inflation is 3 percent.
B. 3 percent and expected inflation is 0 percent.
C. 0 percent and expected inflation is 3 percent.
D. 6 percent and expected inflation is 3 percent.
123. If actual inflation is correctly expected and built into people's wage and price setting
decisions, the Phillips curve:
A. becomes a horizontal line.
B. becomes a vertical line.
C. remains a downward sloping line.
D. becomes an upward sloping line.
124. Refer to the graph shown. If expected inflation is 6 percent, the economy will be in long-
run equilibrium at point:
A. A.
B. B.
C. C.
D. D.
125. Refer to the graph shown. If expected inflation increases from 0 percent to 6 percent the:
A. short-run Phillips curve will shift from PC2 to PC1.
B. short-run Phillips curve will shift from PC1 to PC2
C. economy will move from point C to point A.
D. economy will move from point B to point C.
126. Refer to the graph shown. If actual inflation is 12 percent and expected inflation is 6
percent, the economy will be at point:
A. A.
B. B.
C. C.
D. D.
127. Refer to the graph shown. The shift in the short-run Phillips curve shown is most likely to
be caused by:
A. a decrease in expected inflation.
B. an increase in expected inflation.
C. a decrease in labor productivity.
D. an increase in labor productivity.
128. In 1964 and 1970, unemployment was about 5 percent. Inflation in 1964, however, was 2
percent while in 1970 it was over 5 percent. What might explain this difference?
A. Eexpansionary fiscal policy
B. Expansionary monetary policy
C. An increase in expected inflation
D. An increase in labor productivity
129. Refer to the graph shown.
Suppose an economy begins at point B but then adopts an expansionary monetary policy. In the
short run, this policy would most likely:
A. reduce inflation to 3 percent and raise unemployment to 7.5 percent.
B. reduce inflation to 3 percent and reduce unemployment to 4 percent.
C. raise inflation to 9 percent and raise unemployment to 7.5 percent.
D. raise inflation to 9 percent and reduce unemployment to 4 percent.
130. Refer to the graph shown.
Suppose an economy begins at point B but then adopts a contractionary monetary policy. In the
short run, this policy would most likely:
A. reduce inflation to 3 percent and raise unemployment to 7.5 percent.
B. reduce inflation to 3 percent and reduce unemployment to 4 percent.
C. raise inflation to 9 percent and raise unemployment to 7.5 percent.
D. raise inflation to 9 percent and reduce unemployment to 4 percent.
131. Refer to the graph shown.
Suppose an economy begins at point B but then adopts a contractionary monetary policy. In the
long run, this policy would most likely:
A. raise inflation to 9 percent, but leave unemployment at 5.5 percent.
B. lower inflation to 3 percent, but leave unemployment at 5.5 percent.
C. raise inflation to 9 percent, but lower unemployment to 4 percent.
D. lower inflation to 3 percent, but raise unemployment to 7.5 percent.
132. The short-run Phillips curve differs from the long-run Phillips curve with regard to the
way:
A. expected inflation is treated.
B. wages are treated.
C. prices are treated.
D. unemployment is treated.
133. Refer to the graph shown.
Which of the graphs correctly depicts the short-run Phillips curve in the standard model without
trade?
A. A
B. B
C. C
D. D
134. Refer to the graph shown.
Which of the graphs correctly depicts the short-run Phillips curve with globalization?
A. A
B. B
C. C
D. D
135. Refer to the graph shown. Which of the graphs correctly depicts the long-run Phillips
curve?
A. A
B. B
C. C
D. D
136. Globalization in the past decade has led to a(n):
A. upward-sloping short-run Phillips curve.
B. vertical short-run Phillips curve.
C. flat short-run Phillips curve.
D. backward being short-run Phillips curve.
137. Globalization that allows governments to pursue expansionary policies can be dangerous
because it can lead to:
A. asset price inflation.
B. goods price deflation.
C. goods price inflation.
D. a reduction in the debt ceiling.
138. Refer to the graph shown.
The effect of expansionary fiscal policy on inflation and
unemployment with globalization is best represented by a movement from:
A. A to B.
B. C to B.
C. B to D.
D. B to A.
139. Globalization will tend to:
A. flatten the short-run Phillips curve.
B. flatten the long-run Phillips curve.
C. shift the short-run Phillips curve.
D. shift the long-run Phillips curve.
140. If the economy is at point A in the Phillips curve graph shown and the government runs
expansionary monetary policy, what prediction would you make for inflation?
A. It will increase.
B. It will decrease.
C. It will remain constant.
D. It will explode.
