the phillips curve Mcqs
1. Refer to Exhibit 6. Suppose the economy is operating at point (D) As people revise their price expectations ?
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A. The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 9 per cent inflation

B. The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 3 percent inflation

C. The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 6 percent inflation

D. The long-run Phillips curve will shift to the left
2. If people have rational expectations a monetary policy contraction that is announced and is credible could ?
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A. increase inflation with little or no decrease in unemployment

B. reduce inflation with little or no increase in unemployment

C. reduce inflation but it would increase unemployment by an unusually large amount

D. Increase inflation but would decrease unemployment by an unusually large amount

3. According to the Phillips curve, in the short run, if policy makers choose an expansionary policy to lower the rate of unemployment ?
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A. Inflation will be unaffected if price expectations are unchanging

B. The economy will experience a decrease in inflation

C. None of these answers

D. The economy will experience an increase in inflation
4. Refer to Exhibit 6.If People in the economy expect inflation to be 3 percent and inflation is 3 percent the economy is operating at point ?
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A. H

B. b

C. a

D. I

5. A decrease the Price of foreign oil ?
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A. Shifts the short run Phillips curve upward and makes the Unemployment inflation trade off more favorable

B. Shifts the short-run Phillips curve downward and make the unemployment inflation trade-off less favorable

C. Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favorable

D. Shifts the short run Phillips curve upward and makes the unemployment inflation trade-off more favorable

6. Refer to Exhibit 6. Suppose the economy is Operating in long-run equilibrium at point E. An unexpected monetary contraction will move the economy in the direction of point ?
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A. E

B. F

C. c

D. H

7. The original Phillips curve illustrates ?
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A. The trade-off between output and unemployment

B. The positive relationship between output and unemployment

C. the trade-off between inflation and unemployment

D. The positive relationship between inflation and unemployment

8. Refer to Exhibit 6.Suppose the economy is in long-run equilibrium at point E. A sudden increase in government spending should move the economy in the direction of point ?
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A. b

B. G

C. d

D. E

9. If a countrys policy makers were to continuously use expansionary monetary policy in an attempt to hold unemployment below the natural rate the long-run result would be ?
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A. an increase in the level of output

B. an increase in the rate of inflation

C. All of these answers

D. a decrease in the unemployment rate

10. Which of the following would shift the long-run Phillips curve to the right ?
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A. An increase in the minimum wage

B. An increase in the price of foreign oil

C. An increase in the expected inflation

D. An increase in the aggregate demand

11. Along a short-run Phillips curve, ?
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A. a higher rate of growth in output is associated with a higher unemployment rate.

B. a higher rate of inflation is associated with a higher unemployment rate

C. a higher rate of growth in output is associated with a lower unemployment rate

D. a higher rate of inflation is associated with a lower unemployment rate
12. If the sacrifice ratio is five, a reduction in inflation from 7 percent to 3 percent would require ?
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A. a reduction in output of 20 percent

B. a reduction in output of 5percent

C. a reduction in output of 35 percent

D. a reduction in output of 15 percent

13. Refer to Exhibit 6.If People in the economy expect inflation to be 6 percent but inflation turn out to be 3 percent the economy is operating at point ?
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A. c

B. F

C. H

D. d

14. The misery index Which some commentators suggest measures the health of the economy, is ?
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A. The sum of the growth rate of output and the inflation rate

B. The sum of the natural rate of unemployment and the actual rate of unemployment

C. The sum of the inflation rate and the central banks refinancing rate

D. The sum of the unemployment rate and the inflation rate
15. When actual inflation exceeds expected inflation ?
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A. People will reduce their expectations of inflation in the future

B. Unemployment is less than the natural rate of unemployment

C. Unemployment is equal to the natural rate of unemployment

D. Unemployment is greater than the natural rate of unemployment

16. The Phillips curve is an extension of the model of aggregate supply and aggregate demand because, in the short run, an increase in aggregate demand increase price and ?
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A. decrease growth

B. increases unemployment

C. decreases unemployment

D. decreases inflation

17. Refer to Exhibit 6. Suppose the economy is Operating in long-run equilibrium at point E. In the long run a monetary contraction will move the economy in the direction of point ?
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A. I

B. F

C. H

D. a

18. The natural rate hypothesis argues that ?
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A. in the long run the unemployment rate returns to the natural rate, regardless of inflation

B. Unemployment is always below the natural rate

C. Unemployment is always equal to the natural rate

D. Unemployment is always above the natural rate

19. If, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price level then the long-run Phillips curve ?
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A. has a slope that is determined by how fast people adjust their price expectations

B. is positively sloped

C. is vertical

D. is negatively sloped

20. An increase in expected inflation ?
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A. Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable

B. shifts the short run Phillips curve downward and the unemployment inflation trade-off is less favorable.

C. Shift the short-run Phillips curve downward and the unemployment inflation trade-off is more favorable

D. shifts the short-run Phillips curve upward and the unemployment inflation trade-off is more favorable