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

If workers realize that an increase in nominal wage rates does not necessarily constitute a rise in real wages, then we would expect:

The figure given below depicts the equilibrium level of real GDP and the price level in an economy, derived from the aggregate demand aggregate supply model. Figure 14.3 -Refer to Figure 14.3. Consider that the economy initially operates at point A. Therefore, according to the theory of rational expectations, an unanticipated increase in consumer confidence will cause the economy to move along the path:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves -Refer to Figure 14.1. The movement from point A to point B to point C results in:

Consider an economy in equilibrium, and assume no change in aggregate demand. An earthquake that destroys many factories across the country would result in a(n):

Contrary to what believers in the Phillips curve would say, U.S. economic data from 1955 to 2000 show evidence of:

The figure given below represents the short run and long run Phillips curve. Figure 14.4 -Refer to Figure 14.4. A movement from point A to point C would be associated with an:

The Phillips curve is named after the economist A. W. Phillips, who discovered:

The long-run Phillips curve is a horizontal line at the natural rate of unemployment.

Hyperinflation in developing countries is typically the result of:

Monetary reform is a new monetary policy that includes:

In the short run, a decline in aggregate demand would be associated with:

If an increase in inflation is expected, which of the following events is the least likely to occur?

The money supply increases when, other things equal:

In the 1980s, U.S. economists acknowledged that, it was not possible to exploit the tradeoff suggested by the Philips curve of the 1960s. This realization led to more stable macroeconomic policy, which in turn contributed to:

Business inventories tend to fall after an unexpected increase in aggregate demand.

Following an unexpected decline in aggregate demand, once production cutbacks start offsetting rising inventory levels:

The actual rate of inflation is equal to the expected rate of inflation along the:

One factor that explains the short-run tradeoff between inflation and unemployment is labor contracts that fix wages for an extended period of time.

The observed unemployment rate is less than the natural rate of unemployment if:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves -Refer to Figure 14.1. When the economy moves from point B to point C: