MCQs of Economics - The Phillips Curve – Multiple Choice Question

Question 1 of 20

1. Question

The misery index Which some commentators suggest measures the health of the economy, is:

The sum of the growth rate of output and the inflation rate
The sum of the natural rate of unemployment and the actual rate of unemployment
The sum of the inflation rate and the central bank's refinancing rate
The sum of the unemployment rate and the inflation rate

Question 2 of 20

2. Question

The original Phillips curve illustrates

the trade-off between inflation and unemployment
The trade-off between output and unemployment
The positive relationship between output and unemployment
The positive relationship between inflation and unemployment

Question 3 of 20

3. Question

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

decreases unemployment
decrease growth
increases unemployment
decreases inflation

Question 4 of 20

4. Question

Along a short-run Phillips curve,

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

Question 5 of 20

5. Question

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

is vertical
is negatively sloped
has a slope that is determined by how fast people adjust their price expectations
is positively sloped

Question 6 of 20

6. Question

According to the Phillips curve, in the short run, if policy makers choose an expansionary policy to lower the rate of unemployment

The economy will experience an increase in inflation
The economy will experience a decrease in inflation
Inflation will be unaffected if price expectations are unchanging
None of these answers

Question 7 of 20

7. Question

An increase in expected inflation

shifts the short run Phillips curve downward and the unemployment inflation trade-off is less favorable.
shifts the short-run Phillips curve upward and the unemployment inflation trade-off is more favourable
Shift the short-run Phillips curve downward and the unemployment inflation trade-off is more favourable
Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favourable

Question 8 of 20

8. Question

Which of the following would shift the long-run Phillips curve to the right?

An increase in the minimum wage
An increase in the expected inflation
An increase in the price of foreign oil
An increase in the aggregate demand

Question 9 of 20

9. Question

When actual inflation exceeds expected inflation,

Unemployment is equal to the natural rate of unemployment
People will reduce their expectations of inflation in the future
Unemployment is greater than the natural rate of unemployment
Unemployment is less than the natural rate of unemployment

Question 10 of 20

10. Question

A decrease the Price of foreign oil

Shifts the short-run Phillips curve downward and maker the unemployment inflation trade-off less favourable
Shifts the short run Phillips curve upward and makes the unemployment inflation trade-off more favourable
Shifts the short run Phillips curve upward and makes the Unemployment inflation trade off more favourable
Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favourable

Question 11 of 20

11. Question

The natural rate hypothesis argues that

in the long run the unemployment rate returns to the natural rate, regardless of inflation
Unemployment is always below the natural rate
Unemployment is always above the natural rate
Unemployment is always equal to the natural rate

Question 12 of 20

12. Question

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

b
I
a
H

Question 13 of 20

13. Question

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

H
c
d
F

Question 14 of 20

14. Question

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.

d
G
E
b

Question 15 of 20

15. Question

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

The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 3 percent inflation
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
The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 6 percent inflation
The long-run Phillips curve will shift to the left

Question 16 of 20

16. Question

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

H
F
E
c

Question 17 of 20

17. Question

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:

F
a
H
I

Question 18 of 20

18. Question

If people have rational expectations a monetary policy contraction that is announced and is credible could

reduce inflation with little or no increase in unemployment
Increase inflation but would decrease unemployment by an unusually large amount
increase inflation with little or no decrease in unemployment
reduce inflation but it would increase unemployment by an unusually large amount

Question 19 of 20

19. Question

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

a reduction in output of 20 percent
a reduction in output of 5percent
a reduction in output of 15 percent
a reduction in output of 35 percent

Question 20 of 20

20. Question

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

an increase in the level of output
a decrease in the unemployment rate
an increase in the rate of inflation
All of these answers

MCQs of Economics – The Phillips Curve

Economics - The Phillips Curve

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