permanently rise.
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Ch 01: MC Algo
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ANSWER: a
108. For a very long time the country of Tofu has had an inflation rate of 8 percent. Suddenly its inflation rate drops to 3
percent. The drop in the inflation rate
a. could be due to slower money supply growth. We would expect unemployment to be higher.
b. could be due to slower money supply growth. We would expect unemployment to be lower.
c. could be due to higher money supply growth. We would expect unemployment to be higher.
d. could be due to higher money supply growth. We would expect unemployment to be lower.
ANSWER: a
109. For a number of years country A had inflation of 3 percent but for the last five years has had inflation of 6 percent.
Country B had inflation of 4 percent for many years, but very recently inflation unexpectedly rose to 9 percent. Other
things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?
a. both country A and country B
b. neither country A nor country B
c. country A but not country B
d. country B but not country A
ANSWER: d
110. During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of
inflation. A likely explanation of these facts is that
a. the United Kingdom has a better education system than Turkey.
b. the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey.
c. workers in Turkey are more productive than workers in the United Kingdom.
d. there are more instances of market power in Turkey than in the United Kingdom.
ANSWER: b
111. In the short run, which of the following is not correct?
a. Increasing the money supply increases the demand for goods and services.
b. Increasing the money supply encourages firms to hire more workers.
c. Lowering the money supply leads to a higher level of unemployment.
d. Policies that encourage higher employment will also induce a lower rate of inflation.
ANSWER: d
112. The business cycle is the
a. relationship between unemployment and inflation.
b. irregular fluctuations in economic activity.
c. positive relationship between the quantity of money in an economy and inflation.
d. predictable changes in economic activity due to changes in government spending and taxes.
ANSWER: b
113. Both the production of goods and services and the unemployment rate are used to measure
a. the business cycle.
b. productivity.
c. the interest rate.
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Ch 01: MC Algo
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d. inflation.
ANSWER: a