Multiple choice questions:
Question 1
Suppose GDP __________ the level of potential output. We would expect to see __________ unemployment, rising wages, and rising prices.
A. exceeds; high
B. exceeds; low
C. is below; high
D. is below; low
Question 2
What is the difference between how GDP is determined in the short run and how it is determined in the long run?
A. In the short run, GDP is determined by current demand for goods and services in the economy. In the long run, GDP is determined by supply of labor, the stock of capital and technological progress.
B. In the short run, GDP is determined by future demand for goods and services in the economy. In the long run, GDP is determined by supply of labor, the stock of capital and technological progress.
C. In the long run, GDP is determined by current demand for goods and services in the economy. In the short run, GDP is determined by supply of labor, the stock of capital and technological progress.
D. In the long run, GDP is determined by future demand for goods and services in the economy. In the short run, GDP is determined by supply of labor, the stock of capital and technological progress.
Question 3
If the natural unemployment rate increases, the short-term Phillips curve __________ and the long-run Phillips curve __________.
A. shifts rightward; shifts rightward
B. shifts leftward; shifts leftward
C. shifts rightward; remains the same
D. shifts leftward; remains the same
Question 4
How does change in the expected inflation rate affect the short-run tradeoff between inflation and unemployment?
A. Immediately, because the money wage rate is sensitive to change in the expected inflation rate.
B. Immediately, because unemployment and job production respond quickly to change in the expected inflation rate.
C. Gradually, because the money wage rate responds only gradually to change in the expected inflation rate.
D. Gradually, because the natural unemployment rate rarely changes.
Question 5
The __________ shows the relationship between inflation and unemployment when the economy is at full employment.
A. AS curve
B. short-run Phillips curve
C. long-run Phillips curve
D. AE curve
Question 6
The __________ is a curve that shows the relationship between the inflation rate and the unemployment rate when the natural unemployment rate and the expected inflation rate remain constant.
A. aggregate demand (AD. curve
B. short-run Phillips curve
C. long-run Phillips curve
D. aggregate expenditure (AE. curve
Question 7
What policy action by the Fed describes an unexpected rise in interest rates and deceleration in money growth in order to slow inflation at the cost of recession?
A. rational reduction
B. surprise inflation reduction
C. credible announced inflation reduction
D. statistical model of reduction
Question 8
What is the forecast for inflation that results from the analysis of all the relevant data and economic science?
A. rational expectation
B. surprise inflation expectation
C. credible announced inflation expectation
D. statistical model of expectation
Question 9
The __________ is the percentage change in the price level.
A. Phillips curve
B. consumer price index
C. unemployment rate
D. inflation rate
Question 10
The short-run Phillips curve is another way at looking at the __________.
A. equilibrium expenditure
B. AD curve
C. aggregate supply (AS. curve
D. potential GDP