macro95ex12 - Chapter 12 Unemployment and Inflation T...

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Chapter 12 Unemployment and Inflation T Multiple Choice Questions 1. The origin of the idea of a trade-off between inflation and unemployment was a 1958 article by (a) A.W. Phillips. (b) Edmund Phelps. (c) Milton Friedman. (d) Robert Gordon. Answer: A Level of difficulty: 1 Section: 12.1 2. Phillips’s research looked at British data on (a) unemployment and inflation. (b) unemployment and nominal wage growth. (c) inflation and nominal wage growth. (d) unemployment and output. Answer: B Level of difficulty: 1 Section: 12.1 3. The negative relationship between unemployment and inflation is known as the (a) aggregate supply curve. (b) aggregate demand curve. (c) Phillips curve. (d) efficiency wage line. Answer: C Level of difficulty: 1 Section: 12.1 4. The Phillips curve appeared to fit the data well for the United States in the (a) 1960s. (b) 1970s. (c) 1980s. (d) 1990s. Answer: A Level of difficulty: 1 Section: 12.1
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Chapter 12 Unemployment and Inflation 185 5. Friedman and Phelps suggested that there should not be a stable relationship between inflation and unemployment, but there should be a stable relationship between (a) anticipated inflation and frictional unemployment. (b) anticipated inflation and cyclical unemployment. (c) unanticipated inflation and frictional unemployment. (d) unanticipated inflation and cyclical unemployment. Answer: D Level of difficulty: 1 Section: 12.1 6. Milton Friedman and Edmund Phelps questioned (a) the use of expectations in the Phillips curve. (b) the stability of the relationship between inflation and unemployment. (c) the existence of a natural rate of unemployment. (d) the existence of a full-employment level of output. Answer: B Level of difficulty: 1 Section: 12.1 7. In the extended classical model, an anticipated decrease in the money supply would cause output to _____ and the price level to _____ in the short run. (a) increase; decrease (b) increase; remain unchanged (c) remain unchanged; increase (d) remain unchanged; decrease Answer: D Level of difficulty: 1 Section: 12.1 8. In the extended classical model, an unanticipated increase in the money supply would cause output to _____ and the price level to _____ in the short run. (a) increase; increase (b) decrease; remain unchanged (c) remain unchanged; increase (d) decrease; decrease Answer: A Level of difficulty: 1 Section: 12.1 9. In the extended classical model, an unexpected decrease in aggregate demand would cause unanticipated inflation to be _____ and cyclical unemployment to be _____. (a) positive; negative (b) positive; positive (c) negative; negative (d) negative; positive Answer: D Level of difficulty: 2 Section: 12.1
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186 Abel/Bernanke • Macroeconomics, Fifth Edition 10. In the expectations-augmented Phillips curve, π = e – 3( u u ). If = 0.03 when e = 0.06 and u = 0.06, then u = (a) 0.02. (b) 0.03. (c) 0.04. (d) 0.05. Answer: D Level of difficulty: 2 Section: 12.1 11. In the expectations-augmented Phillips curve, = e – 3( u – 0.06). When = 0.06 and e = 0.03, the unemployment rate is (a) 0.04.
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macro95ex12 - Chapter 12 Unemployment and Inflation T...

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