Answer Page--Unit Five

1. D
2. B
3. C
4. E
5. D
6. B
7. C
8. C
9. A
10. B
11. E

16. The Phillips curve shows that the rate of inflation and the rate of unemployment are _
A) Negatively Related
17. If inflationary expectations increase, the Phillips curve will
A) Shift to the Left
18. A traditional Phillips curve compares what two things?
E) Unemployment and Inflation Rate
19. A traditional Laffer Curve compares what two things?
C) Revenue and Tax Rates
20. Which of these cause large budget deficits?

I. Wars
II. Recessions
III. Lack of fiscal discipline

E) I, II, and III
21. What is the definition of Growth Accounting?
D) The bookkeeping of the supply-side elements that contribute to changes in Real GDP.
22. Examples of U.S. Securities are?
E) All of the above
23. In the equation MV=PQ, the V stands for what?
C) Velocity of Money
24. How would Mainstream Macroeconomists view the private economy?
A) Potentially Unstable
25. How would Monetarists view the velocity of Money?
B) Stable
26. A decrease in which of the following would most likely increase long-run economic growth?
B) Interest rates*
27. Define inflation
B) An increase in the general level of prices, leading to a reduction of currency's purchasing power.
28. The main measure of inflation in the United States is the:
A) Consumer Price Index
29. C
30. D
31. A
32. B
33. E
34. A
35. C
36. D
37.The result of a series of adverse aggregate supply shocks in the economy would be?
B) A leftward movement of the short run aggregate supply curve.
38. Labor productivity is determined by all of the following factors except:
D) The current inflation rate*
39. Which of the following explains why inflation can increase?

I. Increase in aggregate supply

II. Increase in aggregate demand

III. Decrease in rate of money supply growth
B) II only*
40. If other things are equal, a decrease in the price level will:
C) Cause a movement down along a short-run aggregate supply curve.*
41. Which of these is a supply factor in economic growth?
I. the stock of capital
II. aggregate expenditures
III. the size of the labor force
C) I and III only*
42. When is the long-run Phillips Curve vertical?
B) At the natural rate of unemployment*
43. In reference to the Laffer Curve, a decline in the tax rate would most likely result in:
D) Greatly increase tax revenue.*

Miller Lane(44-53)
44. Given that nominal GDP is 6 trillion, real GDP is 5 trillion, and the money supply is 1 trillion, the velocity of money is
E) 6

45. Monetarists believe
C) that changes in the velocity of money are small and predictable

46. Use the following values for a hypothetical economy
Given this information, if the price level is 4, real GDP is
B) $250

47. The new classical view shows that
E) the long-run aggregate supply curve is vertical

48. A decrease in the duration of unemployment benefits
B) lowers both the natural rate of unemployment and inflation

49. For a given expected inflation rate and a given natural unemployment rate, an increase in actual unemployment
C) lowers inflation

50. An increase in productivity
E) does not change the natural rate of unemployment

51. Which of the following causes the inflation rate to increase?

D) lower unemployment rate

52. Over the past decade, the aggregate supply and aggregate demand curves have shifted outward as shown in the diagram. Using this knowledge and the graph above we can conclude that
C) real GDP grew at a faster rate than nominal GDP

53. Based on the information given in the diagrams, the most likely cause of a shift from long-run aggregate supply curve X to curve Y is
A) an increase in labor productivity

54. Assume that the economy is initially at Point A, a shift to point B would:
B) A decrease in aggregate demand

55. The above graph is a:
D) Laffer Curve