Unit Five--Inflation, Unemployment, Stabilization Policies and Growth

Answer Page--Unit Five

Topics may include: Short run to long run, Phillips curve, Laffer Curve, Economic growth, disputes over Macro theory & policy

(Walker Padgett)
1.The Phillip's Curve shows the effect that unemployment has on:
A) Price level
C) Value of currency on the foreign exchange market
D) Inflation
E) Interest rates

(Walker Padgett)
2. The Laffer curve relates how affects tax revenue.
A) Exchange rate
B) Structural unemployment
C) Tax rates
D) Inflation
E) Internal Revenue Service

(Walker Padgett)
3. The Laffer curve rides on the assumption that:
A) As tax rates increase people work more so they will have more money
B) The best way to maximize tax revenue is to implement a very high tax rate.
C) In order to maximize tax revenue, tax rates must not be so high that they discourage economic activity
D) High tax revenues can occur only with full employment
E) Tax rates increase as GDP falls

(Walker Padgett)
4. Disinflation refers to:
A) A reduction in inflation as unemployment decreases
B) A decrease in inflation as price levels drop
C) An increase in inflation as prices levels increase
D) The reduction in the inflation rate from year to year
E) An decrease in inflation because of lack of investment

(Walker Padgett)
5. "Supply Factors" include all of the following, except:
A) Increases in the quality of natural resources
B) Increase in the supply of capital goods
C) Increase in the supply of human resources
D) Increase in imported goods
E) Improvements in technology

(Billy Williams)
6. Stagflation refers to when both *blank* AND *blank* are high at the same time.
A) Interest rates and exchange rates
B) Inflation and Unemployment
C) Supply and Demand
D) Consumer spending and Investment spending
E) Tariffs and Taxes

(Billy Williams)
7. According to the above Productions Possibilities Curve, what most likely caused the jump from B to C?
A) Higher taxes
B) Higher unemployment
C) New technology
D) Greater investment spending
E) Weaker president

(Billy Williams)
8. Supply-side economists believe that the natural rate of unemployment could be reduced by all of the following EXCEPT:
A) weaker labor unions
B) fewer regulations
C) more labor mobility
D) fewer unemployment benefits
E) more government involvement

(Billy Williams)
9. Keynesian economists believe that having full employment and stable prices at the same time is:
A) Essential
B) Disastrous
C) Irrelevant
D) Impossible
E) Normal

(Billy Williams)
10. Which of the following would be considered a supply shock?
A) Consumers demand more effecient automobiles
B) OPEC bans oil from entering the United States
C) Lightning strikes American warehouses from coast to coast.
D) Microsoft raises the price of its software
E) Nike goes out of business

(Billy Williams)
11. The natural rate of unemployment is made up of:
I. Structural unemployment
II. Frictional unemployment
III. Cyclical unemployment

A) I only
B) I and III only
C) I and II only
D) II and III only
E) I, II, and III

(Billy Williams)
12. Using the above Phillips Curve, what is represented by the vertical line labeled "What is this?"
A) Long rang aggregate supply
B) Interest rates
C) natural rate of unemployment
D) inflation rate
E) Exchange rate

(Billy Williams)
13. Anticipated inflation shifts the Short Range Phillip's Curve in which direction?
A) Right
B) Left
C) Up
D) Down
E) No change

external image cgon110l.jpg
(Billy Williams)
14. The above cartoon portrays which economic concept?
A) Unemployment benefits
B) Creative destruction
C) Hidden unemployment
D) Stagflation
E) Classical unemployment

(Billy Williams)
15. All of the following could qualify as seasonal unemployment EXCEPT:
A) a lifeguard
B) a ski instructor
C) a mall santa
D) a christmas tree vender
E) a grocery store clerk

(Jack Rollins)
16. The Phillips curve shows that the rate of inflation and the rate of unemployment are _
A) Negatively Related
B) Linearly Related
C) Independent of eachother
D) Positively Related
E) None of the above

(Jack Rollins)
17. If inflationary expectations increase, the Phillips curve will
A) Shift to the Left
B) Shift to the Right
C) Become Vertical
D) Become upward sloping
E) None of the above

(Jack Rollins)
18. A traditional Phillips curve compares what two things?
A) Real GDP and Unemployment
B) Nominal GDP and Unemployment
C) Real GDP and Inflation Rate
D) Nominal GDP and Inflation Rate
E) Unemployment and Inflation Rate

(Jack Rollins)
19. A traditional Laffer Curve compares what two things?
A) Inflation Rate and Tax Rate
B) Government Expenditures and Tax Rates
C) Revenue and Tax Rates
D) Government Expenditures and Revenue
E) Inflation Rate and Government Expenditures

(Jack Rollins)
20. Which of these cause large budget deficits?

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

A) I only
B) II only
C) I and III
D) II and III
E) I, II, and III

(Jack Rollins)
21. What is the definition of Growth Accounting?
A) The inability to keep nonpayers from obtaining benefits from a certain good.
B) The number of dollars received by and individual or group for its resources during a period of time.
C) The situation in which an increase in the price of one inpute will increase a firm's production costs and reduce it's ouput.
D) The bookkeeping of the supply-side elements that contribute to changes in Real GDP.
E) None of the above

(Jack Rollins)
22. Examples of U.S. Securities are?
A) Treasury Bills
B) Treasury Notes
C) Treasury Bonds
D) U.S. Saving Bonds
E) All of the above

(Jack Rollins)
23. In the equation MV=PQ, the V stands for what?
A) Volatile Funds
B) Volatile Stocks
C) Velocity of Money
D) Both A and B
E) None of the Above

(Jack Rollins)
24. How would Mainstream Macroeconomists view the private economy?
A) Potentially Unstable
B) Entirely Stable
C) Stable in Long run at natural rate of unemployment
D) Stable in the Short run but unreliable in the Long Run
E) No consensus

(Jack Rollins)
25. How would Monetarists view the velocity of Money?
A) Unstable
B) Stable
C) Potentially Unstable in the Long Run
D) Stable in long run at natural rate of unemployment
E) No consensus

(Zach Gardner)
26 A decrease in which of the following would most likely increase long-run economic growth?
A) Productivity
B) Interest rates
C) Fiscal policy
D) Consumer spending
E) Net exports

(Patrick Deehan)
27. Define inflation.
A) A decrease in the general level of prices, leading to a reduction of currency's purchasing power.
B) An increase in the general level of prices, leading to a reduction of currency's purchasing power.
C) A decrease in the general level of prices, leading to an increase in a currency's purchasing power.
D) An increase in the general level of prices, leading to an increase in a currency's purchasing power.
E) A period of constant or near constant pricing levels and currency values.

(Pat Deehan)
28. The main measure of inflation in the United States is the:
A) Consumer Price Index
B) Gross Domestic Product
C) American Inflation Metric
D) Purchasing Power Statistic
E) General Price Index

(Pat Deehan)
29. Which of the following indicates a recession?
A) Frictional Unemployment
B) Structural Unemployment
C) Cyclical Unemployment
D) Full Employment
E) Durable Unemployment

(Patrick Deehan)
30. Which of these pairs are the twin problems caused by the business cycle?
A) Stagflation and Inflation
B) Employment and Recession
C) Peak and Trough
D) Unemployment and Inflation
E) Stagflation and Recession


(Patrick Deehan)
31. The above curve indicates what?
A) Increases in Unemployment and Inflation coinciding.
B) An increase in Unemployment but stagnant inflation.
C) An increase in inflation but no effect on unemployment.
D) Joint decreases in both unemployment and inflation
E) A steady rise in GDP

(Patrick Deehan)
32. An increase in production costs can lead to which of the following?
A) Higher profits
B) Layoffs
C) Steady GDP
D) A sharp rise in purchasing power
E) Stagflation

(Patrick Deehan)
33. Discouraged workers are:
A) Frustrated with their jobs
B) Unable to achieve promotion
C) Actively searching for work
D) Retired
E) Those who no longer seek employment, despite lacking it.

(Pat Deehan)
34. Unemployment statistics are determined by which of the following?
A. Bureau of Labor Services
B. Employment Census Bureau
C. Center for Employment Statistics
D. Federal Bureau of Investigation
E. Independent Contractors

(Patrick Deehan)
35. Inflation is to be:
A) Encouraged
B) Actively Sought
C) Avoided
D) Looked upon with neutrality
E) Ignored

(Patrick Deehan)
36. Unemployment effects different people different ways, which of the following is true?
A) Unemployment among women is significantly higher that that among men.
B) All ethnic groups have similar unemployment.
C) Highly educated workers are more likely to be unemployed.
D) Highly skilled workers have greater job security.
E) Less education = Less unemployment

(Zach Gardner)
37.The result of a series of adverse aggregate supply shocks in the economy would be?
A) A leftward movement of the long run aggregate supply curve.
B) A leftward movement of the short run aggregate supply curve.
C) A rightward movement of the long run aggregate supply curve.
D) A rightward movement of the short run aggregate demand curve.
E) A rightward movement of the short run aggregate supply curve.

(Zach Gardner)
38. Labor productivity is determined by all of the following factors except:
A) Technological process
B) The quantity of capital goods available to workers
C) The efficiency of with which inputs are allocated, combined, and managed
D) The current inflation rate
E) The quality of the labor itself

(Zach Gardner)
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
A) I only
B) II only
C) III only
D) I and III only
E) II and III only

(Zach Gardner)
40. If other things are equal, a decrease in the price level will:
A) Shift the aggregate supply curve to the left.
B) Cause no change in the economy.
C) Cause a movement down along a short-run aggregate supply curve.
D) Shift the aggregate demand curve to the left.
E) Cause a movement up an aggregate demand curve.

(Zach Gardner)
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
A) I only
B) II only
C) I and III only
E) III only

(Zach Gardner)
42. When is the long-run Phillips Curve vertical?
A) During an increase in inflation
B) At the natural rate of unemployment
C) When aggregate supply exceeds aggregate demand
D) At a decreased rate of inflation
E) During a decrease in inflation

(Zach Gardner)
43. In reference to the Laffer Curve, a decline in the tax rate would most likely result in:
A) Greatly decrease tax revenue
B) Shift the curve to the left.
C) Decrease compliance with tax laws.
D) Greatly increase tax revenue.
E) No change

(Miller Lane)
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
A) 1
B) 1.2
C) 5
D) 5.5
E) 6

(Miller Lane)
45. Monetarists believe
A) that the velocity of money is inversely proportional to nominal GDP
B) adverse supply shocks are the main cause of monetary instability
C) that changes in the velocity of money are small and predictable
D) that expansionary fiscal policy is effective
E) policy rules would increase instability in the economy

(Miller Lane)
46. Use the following values for a hypothetical economy
Given this information, if the price level is 4, real GDP is
A) $200
B) $250
C) $350
D) $400
E) $500

(Miller Lane)
47. The new classical view shows that
A) wages aren't flexible downward
B) coordination failures lead to unemployment never decreasing
C) the long-run Phillips curve is downward sloping
D) the long-run Phillips curve is upward sloping
E) the long-run aggregate supply curve is vertical

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

C) lowers the natural rate of unemployment and raises inflation
D) raises the natural rate of unemployment and lowers inflation
E) keeps the natural rate of unemployment the same and lowers inflation

(Miller Lane)
49. For a given expected inflation rate and a given natural unemployment rate, an increase in actual unemployment
A) does not affect inflation
B) increases inflation
C) lowers inflation
D) has no relation to inflation
E) none of the above

(Miller Lane)
50. An increase in productivity
A) increases the natural rate of unemployment
B) decreases the natural rate of unemployment
decreases the real wage
D) increases the real wage
E) does not change the natural rate of unemployment

(Miller Lane)
51. Which of the following causes the inflation rate to increase?
A) lower expected inflation
B) lower markup percentage
C) lower unemployment benefits

D) lower unemployment rate
E) higher unemployment rate

(Miller Lane)
external image chap17b_9.jpg
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
A) nominal GDP and real GDP grew at the same rate
B) nominal GDP grew at a faster rate than real GDP
C) real GDP grew at a faster rate than nominal GDP
D) although nominal GDP increased, real GDP decreased
E) none of the above

(Miller Lane)
external image chap17a_10.jpg
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
B) a decrease in the price level
C) a decrease in the ratio of capital to labor
D) a movement downward and to the right along curve AB
E) a decrease in the unemployment level

(Zach Gardner)

54. Assume that the economy is initially at Point A, a shift to point B would:
A) A decrease in aggregate supply
B) A decrease in aggregate demand
C) An increase in aggregate supply
D) An increase in aggregate demand
E) No change

( Zach Gardner)
55. The above graph is a:
A) Phillips Curve
B) AS/AD Graph
C) Loanable Funds Graph
D) Laffer Curve
E) Money Markets Graph

(Walker Padgett)
56. Capital goods refer to goods that:
A) Are purchased with money
B) Acquired at institutions of higher learning
C) Do not directly satisfy human wants
D) Increase productivity
E) Reduce inflation

(Walker Padgett)
57. Improved resource allocation causes:
A) Higher overall labor productivity and real GDP
B) Structural unemployment
C) Higher demand for entrepreneurial ability
D) Increased propensity to save
E) Increased employment

(Walker Padgett)
58. All of the following are false about the Demand factor except:
A) Unemployed increase demand
B) To achieve higher production households and firms must purchase and consume the economy's output
C) To achieve higher production inflation must increase
D) To achieve higher production unemployment must increase
E) To achieve higher production MPC must increase

(Walker Padgett)
59. The labor force participation rate is the:
A) The percentage of the working-age population actually in the labor force
B) The number of full time employees out of one thousand people
C) Structurally unemployed minus cyclically unemployed
D) Percentage of people that work part time
E) Percentage of people that work full time

(Walker Padgett)
60. Human capital refers to:
A) How wealthy a person is
B) Bank Tellers
C) The knowledge and skills that make a productive worker
D) The entrepreneurial ability of a person
E) The level of a person's education