Multiple Choice Questions:
1. As the economy moves up and to the right along a short-run aggregate supply curve, it
a. Moves up and to the right along the short-run Phillips curve.
b. Moves up and to the left along the short-run Phillips curve.
c. Moves down and to the right along the short-run Phillips curve.
d. Moves down and to the left along the short-run Phillips curve.
2. If the actual unemployment rate exceeds the natural rate of unemployment, there will be a tendency toward
a. Increased inflation and a leftward shift of the short-run Phillips curve.
b. Decreased inflation and a rightward shift of the short-run Phillips curve.
c. Increased inflation and a rightward shift of the short-run Phillips curve.
d. Decreased inflation and a leftward shift of the short-run Phillips curve.
3. An increase in the expected level of inflation will cause short-run aggregate supply to _____ and the short-run Phillips curve to ______.
a. Shift left; shift right
b. Shift left; shift left
c. Shift right; shift right
d. Shift right; shift left
e. None of the above
4. A decrease in inflation expectations causes producers to push for _____ input prices, which results in a(n) _____ shift in the short-run Phillips curve.
a. Lower; rightward
b. Lower; leftward
c. Higher; rightward
d. Higher; leftward
5. Whenever the actual rate of inflation is less than the expected rate of inflation,
a. The unemployment rate will fall.
b. The unemployment rate will exceed the natural rate of unemployment.
c. The unemployment rate will rise.
d. The unemployment rate will be below the natural rate of unemployment.
e. Both c and d will occur.
6. In the long run, an increase in the actual annual rate of inflation from 8 percent to 10 percent will?
a. Not affect the natural rate of unemployment.
b. Not affect the actual rate of unemployment.
c. Increase the natural rate of unemployment.
d. Increase the actual rate of unemployment.
e. Not affect either the natural rate of unemployment or the actual rate of unemployment.
7. According to rational expectations, if workers and firms forecast inflation accurately?
a. The real wage will not decline as the price level rises.
b. Workers will not lose from inflation, and firms will not gain.
c. The aggregate supply curve will be vertical.
d. All of the above are correct.
8. If increased inflation exceeds forecast inflation in the short run but not in the long run, what are the shapes of the aggregate supply curves?
a. AS is vertical in the short run and long run.
b. AS is vertical in the short run, and upward sloping in the long run.
c. AS is upward sloping in the short run, and vertical in the long run.
d. AS is upward sloping in the short run, and horizontal in the long run.
e. AS is horizontal in the short run and the long run.