Exam 14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

The business cycle that results from the election campaign of incumbent politicians is called a:

A recessionary real shock is associated with an outward shift of the short-run Phillips curve and with a leftward shift of the short-run aggregate supply curve.

According to the theory of rational expectations, expansionary fiscal policy that is anticipated will:

The long-run aggregate supply curve at potential national income is analogous to:

A time-inconsistent monetary policy is one that:

Suppose workers expect the inflation rate to be 3.6 percent and they receive a nominal wage increase of 7.5 percent. If the actual inflation rate turns out to be 2.8 percent, workers will receive a lower real wage than expected.

Assume that an unemployed person expects inflation to be 4.5 percent. In reality, inflation turns out to be 2.9 percent. If wage expectations lag behind actual price changes:

The only difference between adaptive and rational expectations is that adaptive expectation assumes economic agents to be irrational.

The Phillips curve describes a negative relationship between unemployment and inflation.

If the Fed follows a high-growth monetary policy, but workers believe that the policy is time inconsistent, then low-wage contracts will be in force and unemployment will decline.

The long run Phillips curve assumes that every unemployed worker who is looking for a job has a constant reservation wage.

Consider a nation experiencing the relationship illustrated by the short run Phillips curve. An increase in both unemployment and inflation in this nation over the next ten years can be explained by:

In the presence of Regulation Q, when interest rates rise:

According to the long-run Phillips curve, which of the following will be the end result of an expansionary monetary policy when unemployment is at its natural rate?

The pursuit of low unemployment rates must necessarily result in time-inconsistent government policies.

In order to achieve an unemployment rate below the natural rate of unemployment, the Fed must pursue a policy of low-monetary-growth during a time when the public expects high inflation.

According to the rational expectations view:

The adaptive expectations theory suggests that:

The key feature due to which unexpected inflation decreases the unemployment rate is that:

Which of the following techniques adopted by the central banks around the world have helped them to achieve credibility?