Determine reduction in the money supply – Microeconomics
1. Which of the following is an example of an automatic stabilizer?
A. spending on Medicare, a health care program for the elderly
B. spending on research and development
C. unemployment compensation
D. spending on the improvement of public roadways
E. all of the above
2. Which of the following is an example of “supply-side economics”?
A. an investment tax credit
B. a one-time tax rebate to low-income families
C. a new Medicare drug benefit for the elderly
D. an increase in Social Security benefits
E. all of the above
3. Which of the following statements about unemployment and inflation is false?
A. The short-run Phillips curve demonstrates a negative relationship between unemployment and inflation, whereas the long-run Phillips curve is horizontal because the natural rate of unemployment is fixed.
B. The “misery index” is produced by adding the rate of unemployment and the rate of inflation.
C. If people expect inflation to be higher in the future than it is today, the short-run Phillips curve will shift to the right.
D. Means-tested programs tend to favor those with low income while a consumption tax would favor those with high income.
E. A positive supply shock, such as a new technology that reduces manufacturing costs, would shift the entire short-run Phillips curve to the left.
4. If people’s expectations are rational and their central bank is credible, an announcement of an imminent reduction in the money supply would result in
A. less inflation but more unemployment.
B. more inflation but less unemployment.
C. less inflation but the same level of unemployment.
D. more inflation but the same level of unemployment.
E. less inflation and less unemployment.
