The Phillips Curve And Taxation(Economics ) Questions and Answers

Question 1. If people have rational expectations a monetary policy contraction that is announced and is credible could ?
  1.    reduce inflation with little or no increase in unemployment
  2.    Increase inflation but would decrease unemployment by an unusually large amount
  3.    increase inflation with little or no decrease in unemployment
  4.    reduce inflation but it would increase unemployment by an unusually large amount
Explanation:-
Answer: Option A. -> reduce inflation with little or no increase in unemployment
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 2. 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 ?
  1.    H
  2.    F
  3.    E
  4.    c
Explanation:-
Answer: Option B. -> F
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 3. 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 ?
  1.    b
  2.    I
  3.    a
  4.    H
Explanation:-
Answer: Option D. -> H
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 4. A decrease the Price of foreign oil ?
  1.    Shifts the short-run Phillips curve downward and make the unemployment inflation trade-off less favorable
  2.    Shifts the short run Phillips curve upward and makes the unemployment inflation trade-off more favorable
  3.    Shifts the short run Phillips curve upward and makes the Unemployment inflation trade off more favorable
  4.    Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favorable
Explanation:-
Answer: Option D. -> Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favorable
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 5. 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 ?
  1.    d
  2.    G
  3.    E
  4.    b
Explanation:-
Answer: Option A. -> d
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 6. Which of the following would shift the long-run Phillips curve to the right ?
  1.    An increase in the minimum wage
  2.    An increase in the expected inflation
  3.    An increase in the price of foreign oil
  4.    An increase in the aggregate demand
Explanation:-
Answer: Option A. -> An increase in the minimum wage
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 7. According to the Phillips curve, in the short run, if policy makers choose an expansionary policy to lower the rate of unemployment ?
  1.    The economy will experience an increase in inflation
  2.    The economy will experience a decrease in inflation
  3.    Inflation will be unaffected if price expectations are unchanging
  4.    None of these answers
Explanation:-
Answer: Option A. -> The economy will experience an increase in inflation
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 8. 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 ?
  1.    an increase in the level of output
  2.    a decrease in the unemployment rate
  3.    an increase in the rate of inflation
  4.    All of these answers
Explanation:-
Answer: Option C. -> an increase in the rate of inflation
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 9. The original Phillips curve illustrates ?
  1.    the trade-off between inflation and unemployment
  2.    The trade-off between output and unemployment
  3.    The positive relationship between output and unemployment
  4.    The positive relationship between inflation and unemployment
Explanation:-
Answer: Option A. -> the trade-off between inflation and unemployment
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 10. Along a short-run Phillips curve, ?
  1.    a higher rate of inflation is associated with a lower unemployment rate
  2.    a higher rate of growth in output is associated with a lower unemployment rate
  3.    a higher rate of inflation is associated with a higher unemployment rate
  4.    a higher rate of growth in output is associated with a higher unemployment rate.
Explanation:-
Answer: Option A. -> a higher rate of inflation is associated with a lower unemployment rate
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
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