Exam 28: Inflation, Unemployment, and Federal Reserve Policy

Evidence shows that for many people, delaying searching for a job for a year or longer after they are laid off will contribute to a deterioration of their job skills, making it harder for them to find employment. This deterioration in job skills and the subsequent retraining that is necessary to obtain employment relates to which type of unemployment?

If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve

If changes in inflation are higher than expected

If actual inflation is greater than expected inflation, what is the relationship between the actual real wage and the expected real wage?

Use the information below to explain adjustments that move the economy to a long-run equilibrium. Assume that firms and workers have adaptive expectations. The current unemployment rate = 7%. The natural rate of unemployment = 5.5%. Last year's inflation rate = 5%. This year's inflation rate = 4%.

Evidence shows that many people who delay searching for a job for a year or longer after they are laid off

The "rational expectations" school of economists, including Robert Lucas and Thomas Sargent, argue that changes in monetary policy cannot affect unemployment rates in the short run or long run.

If inflationary expectations on the part of the public increase, the trade-off between inflation and unemployment becomes worse.

If actual inflation is less than expected inflation, which of the following will be true?

If the economy is producing ________, unemployment is at its natural rate.

Matt's real wage in 2018 is $26.80. If the price level is 104, what is Matt's nominal wage?

The curve showing the short-run relationship between the ________ and the ________ is called the Phillips curve.

Figure 28-3 -Refer to Figure 28-3. The shifts shown in the short-run and long-run Phillips curves between period 1 and period 2 could be explained by

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate. If the economy was to move to point C, which of the following must be true?

If workers and firms know that the Federal Reserve is following an expansionary monetary policy, workers and firms will expect inflation to ________ and will adjust wages so that the real wage ________.

According to the short-run Phillips curve, if unemployment is 2.4% and inflation is 3.7%, a decrease in the inflation rate might result in which of the following?

Figure 28-5 -Refer to Figure 28-5. Consider the Phillips curves shown in the above graph. We can conclude from this graph that

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A, and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point C in the long run?

Shondra's real wage in 2018 is $18.50. If the price level is 106, what is Shondra's nominal wage?

Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by