________________________ Name: Class: ___________________ Date: __________
Quiz 11
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
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1. If the short-run Phillips curve were stable, which of the following would be unusual?
a. an increase in government spending and a fall in unemployment
b. an increase in inflation and a decrease in output
c. a decrease in the inflation rate and a rise in the unemployment rate
d. a decrease in output and an increase in unemployment
2. In the short-run, when aggregate demand increases, prices
a. will fall and unemployment will rise.
b. and unemployment fall.
c. and unemployment rise.
d. will rise and unemployment will fall.
3. Friedman and Phelps argued
a. that in the long run, monetary growth did not influence those factors that determine the
economy's unemployment rate.
b. the Phillips curve could be exploited in the long run by using monetary, but not fiscal
policy.
c. that the short-run Phillips curve was flat.
d. that there was either a short-run or long-run tradeoff between inflation and
unemployment.
4. The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on
a. the natural rate of unemployment and monetary growth.
b. the natural rate of unemployment, but not monetary growth.
c. monetary growth, but not the natural rate of unemployment.
d. neither monetary growth nor the natural rate of unemployment.
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ID: A
Name: ________________________
ID: A
Use the graph below to answer the following questions.
Figure 35-2
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5. Refer to Figure 35-2. If the economy starts at c and the money supply growth rate increases, in the short run
the economy
a. moves to b.
b. moves to d.
c. moves to e.
d. None of the above is correct.
6. Refer to Figure 35-2. If the economy starts at c and the money supply growth rate decreases, in the short run
the economy
a. moves to b.
b. stays at c.
c. moves to e.
d. None of the above is correct.
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Name: ________________________
ID: A
Use the two graphs in the diagram to answer the following questions.
Figure 35-3
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7. Refer to Figure 35-3. Starting from c and 3, in the short run, an unexpected decrease in money supply growth
moves the economy to
a. a and 1.
b. b and 2.
c. back to c and 3.
d. d and 4.
____ 8. Which of the following would cause the price level to rise and output to fall in the short an run?
a. increase in the money supply
b. a decrease in the money supply
c. an adverse supply shock
d. a favorable supply shock
____ 9. Suppose an economy with high inflation decides to decrease the money supply growth rate.
a. Initially unemployment rises. Eventually the short-run Phillips curve shifts right.
b. Initially unemployment rises. Eventually the short-run Phillips curve shifts left.
c. Initially unemployment falls. Eventually the short-run Phillips curve shifts right.
d. Initially unemployment falls. Eventually the short-run Phillips curve shifts left.
____ 10. Proponents of rational expectations argued that the sacrifice ratio
a. would be high because it was rational for people not to immediately change their
expectations.
b. would be high because people might adjust their expectations quickly if they found
anti-inflation policy credible.
c. could be low because it was rational for people not to immediately change their
expectations.
d. could be low because people might adjust their expectations quickly if they found
anti-inflation policy credible.
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Name: ________________________
ID: A
Use the pair of diagrams below to answer the following questions.
Figure 35-1
____ 11. Refer to Figure 35-1. 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.
____ 12. Refer to Figure 35-1. 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. d and 3.
d. None of the above is correct.
____ 13. Refer to Figure 35-1. 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.
____ 14. Refer to Figure 35-1. 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.
____ 15. Refer to Figure 35-1. If the economy starts at c and 1, then in the short run, a decrease in the money supply
growth rate moves the economy to
a. e and 1.
b. d and 2.
c. d and 3.
d. None of the above is correct.
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