Question 1

Efficiency wage theorists argue that monetary and fiscal policies will not work.

Accepted Answer

A) True 
 B)False

Question 2

New Keynesian economists critique rational expectations by arguing that short-term wage stickiness is brought about by:

Accepted Answer

A)   the policy ineffectiveness proposition.
B)   imperfect information and efficiency wages.
C)   competitive markets and inflation.
D)   competitive markets and market-clearing wages.E) A) and C)
F) A) and B)

Question 3

Which of the following does NOT describe the natural rate of unemployment?

Accepted Answer

A)   the point where the rates of change in productivity and wages are equal
B)   the unemployment rate that exerts inflationary pressures
C)   the unemployment rate at which inflation equals expected inflation,resulting in zero price pressures on the economy
D)   the point where the rates of change in productivity and wages are equal and the unemployment rate exerts no inflationary pressuresE) All of the above
F) A) and C)

Question 4

Deflation can be a problem because it:

Accepted Answer

A)   leads to higher wages.
B)   makes it more difficult to pay off debt.
C)   can easily become hyperinflation.
D)   increases interest rates.E) C) and D)
F) A) and B)

Question 5

Monetized debt occurs when debt is reduced by a cut in the money supply.

Accepted Answer

A) True 
 B)False

Question 6

According to the equation for the Phillips curve,if nominal wages rise by 8% and labor productivity rises by 5%,then we can expect:

Accepted Answer

A)   prices to drop by 3%.
B)   no change in prices.
C)   prices to rise by 3%.
D)   prices to drop by 5%.E) B) and C)
F) A) and D)

Question 7

Adaptive expectations are formed when people use economic models to predict the future.

Accepted Answer

A) True 
 B)False

Question 8

Assume that nominal wages increase 10% and productivity increases 20%.Using the equation for the Phillips curve,inflation is:

Accepted Answer

A)   10%.
B)   20%.
C)   30%.
D)   -10%.E) None of the above
F) A) and C)

Question 9

Which of the following is NOT a cost of using fiscal or monetary policy to address a jobless recovery?

Accepted Answer

A)   Expansionary monetary policy may lead to inflation in the long run.
B)   Government spending might crowd out spending by consumers and firms.
C)   Lower interest rates encourage consumers to increase spending.
D)   Cutting taxes and increasing government spending increase the national debt.E) A) and D)
F) None of the above

Question 10

If inflationary expectations fall:

Accepted Answer

A)   there is a movement down along the Phillips curve.
B)   the Phillips curve shifts outward.
C)   the Phillips curve shifts inward.
D)   there is a movement up along the Phillips curve.E) C) and D)
F) None of the above

Question 11

Suppose the economy is at the natural rate of unemployment,but it's an election year and expansionary policies are used to reduce the unemployment rate.If inflation now exceeds expected inflation,real wages have _____ and workers will demand _____ in their nominal wages.

Accepted Answer

A)   risen;increases
B)   risen;decreases
C)   fallen;no changes
D)   fallen;increasesE) A) and D)
F) A) and B)

Question 12

By paying an efficiency wage,employers give employees an incentive to shirk their duties.

Accepted Answer

A) True 
 B)False

Question 13

Any action that reduces the public's perception of the rate of future inflation will shift the Phillips curve to the left.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer questions 
Figure: Understanding Phillips Curves b? A)  zero B)  3% C)  4% D)  5%" class="answers-bank-image d-inline" rel="preload" >
-(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCb?

Accepted Answer

A)   zero
B)   3%
C)   4%
D)   5%E) B) and C)
F) A) and D)

Question 15

The Fed will most likely halt its quantitative easing program by:

Accepted Answer

A)   increasing the money supply.
B)   raising reserve requirements.
C)   raising the discount rate.
D)   selling assets from its portfolio.E) A) and B)
F) None of the above

Question 16

The shift outward in the Phillips curve in the 1970s was caused by:

Accepted Answer

A)   the oil supply shocks of the mid-1970s and the rise in inflationary expectations.
B)   the fall in the unemployment rate.
C)   the fall in the inflation rate.
D)   the rise in the trade deficit.E) All of the above
F) C) and D)

Question 17

Adjustable-rate mortgages usually have interest rates lower than market rates during the first year.

Accepted Answer

A) True 
 B)False

Question 18

Accelerating inflation causes nominal wages to rise,shifting the short-run aggregate supply curve to the _____ and the Phillips curve to the _____.

Accepted Answer

A)   right;right
B)   left;right
C)   right;left
D)   left;leftE) B) and D)
F) All of the above

Question 19

Milton Friedman argued that:

Accepted Answer

A)   people's experiences determine their behavior.
B)   people's expectations determine their behavior.
C)   people are irrational.
D)   in the long run,people's expectations are irrelevant.E) A) and C)
F) C) and D)

Question 20

In a global economy,a problem with using expansionary fiscal and monetary policies to fix the problems in our country is that they can lead to retaliatory actions by other nations.

Accepted Answer

A) True 
 B)False

Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Efficiency wage theorists argue that monetary and fiscal policies will not work.

Correct AnswerverifiedShow Answer

The Fed will most likely halt its quantitative easing program by:

Correct AnswerverifiedShow Answer

If inflationary expectations fall:

Correct AnswerverifiedShow Answer

Milton Friedman argued that:

Correct AnswerverifiedShow Answer

Adaptive expectations are formed when people use economic models to predict the future.

Correct AnswerverifiedShow Answer

Assume that nominal wages increase 10% and productivity increases 20%.Using the equation for the Phillips curve,inflation is:

Correct AnswerverifiedShow Answer

New Keynesian economists critique rational expectations by arguing that short-term wage stickiness is brought about by:

Correct AnswerverifiedShow Answer

In a global economy,a problem with using expansionary fiscal and monetary policies to fix the problems in our country is that they can lead to retaliatory actions by other nations.

Correct AnswerverifiedShow Answer

According to the equation for the Phillips curve,if nominal wages rise by 8% and labor productivity rises by 5%,then we can expect:

Correct AnswerverifiedShow Answer

The shift outward in the Phillips curve in the 1970s was caused by:

Correct AnswerverifiedShow Answer

Suppose the economy is at the natural rate of unemployment,but it's an election year and expansionary policies are used to reduce the unemployment rate.If inflation now exceeds expected inflation,real wages have _____ and workers will demand _____ in their nominal wages.

Correct AnswerverifiedShow Answer

Adjustable-rate mortgages usually have interest rates lower than market rates during the first year.

Correct AnswerverifiedShow Answer

Which of the following is NOT a cost of using fiscal or monetary policy to address a jobless recovery?

Correct AnswerverifiedShow Answer

Accelerating inflation causes nominal wages to rise,shifting the short-run aggregate supply curve to the _____ and the Phillips curve to the _____.

Correct AnswerverifiedShow Answer

Which of the following does NOT describe the natural rate of unemployment?

Correct AnswerverifiedShow Answer

Deflation can be a problem because it:

Correct AnswerverifiedShow Answer

By paying an efficiency wage,employers give employees an incentive to shirk their duties.

Correct AnswerverifiedShow Answer

Any action that reduces the public's perception of the rate of future inflation will shift the Phillips curve to the left.

Correct AnswerverifiedShow Answer

Monetized debt occurs when debt is reduced by a cut in the money supply.

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Understanding Phillips Curves -(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCb?

Correct AnswerverifiedShow Answer

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Suppose the economy is at the natural rate of unemployment,but it's an election year and expansionary policies are used to reduce the unemployment rate.If inflation now exceeds expected inflation,real wages have _ and workers will demand _ in their nominal wages.

Correct Answer
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Correct Answer
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Accelerating inflation causes nominal wages to rise,shifting the short-run aggregate supply curve to the _ and the Phillips curve to the _.

Correct Answer
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Use the following to answer questions Figure: Understanding Phillips Curves -(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_b?

Correct Answer
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