Economics MCQs

Page No. 384

Along a short-run Phillips curve, ?


aa higher rate of inflation is associated with a lower unemployment rate

✓


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

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ca higher rate of inflation is associated with a higher unemployment rate

✖


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

✖


View Answer a higher rate of inflation is associated with a lower unemployment rate

The original Phillips curve illustrates ?


athe trade-off between inflation and unemployment

✓


bThe trade-off between output and unemployment

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cThe positive relationship between output and unemployment

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d The positive relationship between inflation and unemployment

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View Answer the trade-off between inflation and unemployment

If a country’s 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 ?


aan increase in the level of output

✖


ba decrease in the unemployment rate

✖


can increase in the rate of inflation

✓


dAll of these answers

✖


View Answer an increase in the rate of inflation

If the sacrifice ratio is five, a reduction in inflation from 7 percent to 3 percent would require ?


aa reduction in output of 20 percent

✓


b a reduction in output of 5percent

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ca reduction in output of 15 percent

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d a reduction in output of 35 percent

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View Answer a reduction in output of 20 percent

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 ? 0


aF

✖


bA

✖


cH

✓


dI

✖


View Answer H

Refer to Exhibit 6. Suppose the economy is operating at point (D) As people revise their price expectations ?


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

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bThe short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 9 per cent 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

✓


View Answer The long-run Phillips curve will shift to the left

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 ?


aH

✖


bC

✖


cD

✖


dF

✓


View Answer F

The natural rate hypothesis argues that ?


a in the long run the unemployment rate returns to the natural rate, regardless of inflation

✓


b Unemployment is always below the natural rate

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cUnemployment is always above the natural rate

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d Unemployment is always equal to the natural rate

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View Answer in the long run the unemployment rate returns to the natural rate, regardless of inflation

When actual inflation exceeds expected inflation ?


aUnemployment is equal to the natural rate of unemployment

✖


bPeople will reduce their expectations of inflation in the future

✖


c Unemployment is greater than the natural rate of unemployment

✖


dUnemployment is less than the natural rate of unemployment

✓


View Answer Unemployment is less than the natural rate of unemployment

An increase in expected inflation ?


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

✖


bhifts the short-run Phillips curve upward and the unemployment inflation trade-off is more favorable

✖


cShift 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 less favorable. Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable

✓


View Answer . Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable

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