The Short-Run Policy Tradeoff

2. 15 The Short-Run Policy Tradeoff CLICKER QUESTIONS

3. Checkpoint 15.3 Checkpoint 15.1 Checkpoint 15.2 Question 1 Question 8 Question 5 Question 9 Question 6 Question 2 Question 10 Question 3 Question 7 Question 4

4. CHECKPOINT 15.1 Question 1 As the economy moves along the short-run Phillips curve and the unemployment rate increases, the inflation rate ________. • decreases • increases • does not change • initially decreases and then increases • initially increases and then decreases

5. CHECKPOINT 15.1 Question 2 If real GDP exceeds potential GDP, then employment is ____ full employment and the unemployment rate ____ the natural unemployment rate. • below; exceeds • equal to; is less than • above; is less than • above; exceeds • equal to; equal to

6. CHECKPOINT 15.1 Question 3 According to Okun’s Law, if the natural unemployment rate is 5 percent, the actual unemployment rate is 4 percent, and potential GDP is $10 trillion, then actual real GDP is ______. • $12 trillion • $11 trillion • $9.6 trillion • $10.4 trillion • $10.2 trillion

7. CHECKPOINT 15.1 Question 4 When a movement up along the aggregate supply curve occurs, there is also _________. • a movement down along the short-run Phillips curve • a movement up along the short-run Phillips curve • a rightward shift of the short-run Phillips curve • a leftward shift of the short-run Phillips curve • neither a movement along nor a shift in the short-run Phillips curve

8. CHECKPOINT 15.2 Question 5 When the expected inflation rate ____, the short-run Phillips curve ____. • falls; shifts upward • rises; shifts upward • rises; shifts downward • falls; does not shift • rises; might shift upward or downward depending on how the long-run Phillips curve shifts

9. CHECKPOINT 15.2 Question 6 The natural rate hypothesis states that changes in the_____. • natural unemployment rate bring a temporary change in the inflation rate • inflation rate temporarily change the unemployment rate • unemployment rate exceed changes in the inflation rate • the unemployment rate are less than changes in the natural unemployment rate • the inflation rate temporarily change the natural unemployment rate

10. CHECKPOINT 15.2 Question 7 If the natural unemployment rate decreases, then the short-run Phillips curve ____ and the long-run Phillips curve ____. • does not shift; shifts leftward • shifts leftward; shifts rightward • shifts rightward; shifts leftward • shifts leftward; shifts leftward • shifts leftward; does not shift

11. CHECKPOINT 15.3 Question 8 A surprise reduction of inflation will ________. • raise the expected inflation rate • increase real GDP • create a recession • decrease the natural unemployment rate • eventually shift in the short-run Phillips curve downward

12. CHECKPOINT 15.3 Question 9 A credible announced inflation reduction results in ____ natural unemployment rate and ____ shift in the short-run Phillips curve. • a higher; an upward • a lower; an upward • no change in the; an upward • no change in the; a downward • no change in the; no

13. CHECKPOINT 15.3 Question 10 In 1981, the Fed _____. • created a surprise inflation reduction policy and created an expansion • created a surprise inflation reduction policy and created a recession • credibly announced an inflation reduction policy and created a recession • credibly announced an inflation reduction policy and created an expansion • took no action so that the inflation rate skyrocketed