Question 1

When inflation is very low,how do workers and firms adjust their expectations of inflation?

Accepted Answer

A)  They rapidly adjust their expectations of inflation upward. 
B)  They rapidly adjust their expectations of inflation downward. 
C)  They tend to ignore inflation. 
D)  They are more aggressive in asking for wage and price increases. 
A)  They rapidly adjust their expectations of inflation upward. 
B)  They rapidly adjust their expectations of inflation downward. 
C)  They tend to ignore inflation. 
D)  They are more aggressive in asking for wage and price increases.

Question 2

Matt's real wage in 2012 is $26.80.If the price level is 104,what is Matt's nominal wage?

Accepted Answer

A)  $30.80 
B)  $27.87 
C)  $26.80 
D)  $25.77 
A)  $30.80 
B)  $27.87 
C)  $26.80 
D)  $25.77

Question 3

A decrease in expected inflation will

Accepted Answer

A)  reduce real wages. 
B)  increase the natural rate of unemployment. 
C)  shift the long-run Phillips curve to the left. 
D)  shift the short-run Phillips curve to the left. 
A)  reduce real wages. 
B)  increase the natural rate of unemployment. 
C)  shift the long-run Phillips curve to the left. 
D)  shift the short-run Phillips curve to the left.

Question 4

Workers at a local mining company are paid $25.60 per hour,and they have incorporated a 3 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 5 percent will affect the real wage and the unemployment rate.

Accepted Answer

If actual inflation is 3%,a 3% increase

Question 5

If workers and firms raise their inflation expectations,

Accepted Answer

A)  unemployment will fall. 
B)  actual inflation will fall to match expected inflation. 
C)  the short-run Phillips curve will be vertical. 
D)  the short-run Phillips curve will shift upward. 
A)  unemployment will fall. 
B)  actual inflation will fall to match expected inflation. 
C)  the short-run Phillips curve will be vertical. 
D)  the short-run Phillips curve will shift upward.

Question 6

If the Federal Reserve's announcements about upcoming monetary policy decisions are not credible,which of the following would you expect to see?

Accepted Answer

A)  Inflation expectations will accurately reflect actual inflation. 
B)  Expansionary monetary policy will result in lower rates of inflation. 
C)  Firms and workers will be unable to accurately forecast changes in the rate of inflation. 
D)  The Federal Reserve will have more control over the inflation rate. 
A)  Inflation expectations will accurately reflect actual inflation. 
B)  Expansionary monetary policy will result in lower rates of inflation. 
C)  Firms and workers will be unable to accurately forecast changes in the rate of inflation. 
D)  The Federal Reserve will have more control over the inflation rate.

Question 7

The natural rate of unemployment is fixed and unchanging.

Accepted Answer

A) True 
 B)False

Question 8

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Accepted Answer

A)  at the point where the rate of inflation and the unemployment rate are equal 
B)  at the natural rate of inflation 
C)  at the point where actual inflation is equal to expected inflation 
D)  There is no intersection between the short-run and long-run Phillips curves. 
A)  at the point where the rate of inflation and the unemployment rate are equal 
B)  at the natural rate of inflation 
C)  at the point where actual inflation is equal to expected inflation 
D)  There is no intersection between the short-run and long-run Phillips curves.

Question 9

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 = 4%.
The natural rate of unemployment = 6%.
Last year's inflation rate = 3%.
This year's inflation rate = 4%.

Accepted Answer

If firms and workers have adaptive expec

Question 10

If workers and firms expect that inflation will be 3 percent next year,and real wages are not changing over time,by how much will nominal wages increase?

Accepted Answer

A)  3 percent 
B)  more than 3 percent 
C)  less than 3 percent 
D)  depends on actual inflation for next year 
A)  3 percent 
B)  more than 3 percent 
C)  less than 3 percent 
D)  depends on actual inflation for next year

Question 11

According to economists Robert Lucas and Thomas Sargent,when are the gains to accurately forecasting inflation highest?

Accepted Answer

A)  when inflation is high and unstable 
B)  when inflation is low 
C)  when inflation is moderate but stable 
D)  when inflation is high and stable 
A)  when inflation is high and unstable 
B)  when inflation is low 
C)  when inflation is moderate but stable 
D)  when inflation is high and stable

Question 12

What is the NAIRU?

Accepted Answer

A)  the natural accelerating inflation rate of unemployment 
B)  the nonaccelerating inflation rate of unemployment 
C)  the nongovernmental agency of inflationary rate unions 
D)  the new accrual index of real unemployment 
A)  the natural accelerating inflation rate of unemployment 
B)  the nonaccelerating inflation rate of unemployment 
C)  the nongovernmental agency of inflationary rate unions 
D)  the new accrual index of real unemployment

Question 13

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

Accepted Answer

A)  The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B)  The Fed could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy. 
C)  The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D)  The Fed has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal. 
A)  The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B)  The Fed could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy. 
C)  The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D)  The Fed has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal.

Question 14

If expected inflation rises,the long-run Phillips curve will

Accepted Answer

A)  shift to the right. 
B)  not be affected. 
C)  shift to the left. 
D)  become negatively sloped. 
A)  shift to the right. 
B)  not be affected. 
C)  shift to the left. 
D)  become negatively sloped.

Question 15

When will an increase in aggregate demand not result in lower unemployment rates in the short run?

Accepted Answer

An increase in aggregate demand will not

Question 16

What is the natural rate of unemployment?

Accepted Answer

A)  the unemployment rate that exists when the economy is at potential GDP 
B)  the unemployment rate that exists when the economy is at a trough in a business cycle 
C)  an unemployment rate of 0% 
D)  any unemployment rate that is above the inflation rate 
A)  the unemployment rate that exists when the economy is at potential GDP 
B)  the unemployment rate that exists when the economy is at a trough in a business cycle 
C)  an unemployment rate of 0% 
D)  any unemployment rate that is above the inflation rate

Question 17

Which of the following would be the source of a "real" business cycle?

Accepted Answer

A)  changes in technology 
B)  anticipated expansionary monetary policy 
C)  unanticipated expansionary monetary policy 
D)  unanticipated contractionary monetary policy 
A)  changes in technology 
B)  anticipated expansionary monetary policy 
C)  unanticipated expansionary monetary policy 
D)  unanticipated contractionary monetary policy

Question 18

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

Accepted Answer

If workers and firms have rational expec

Question 19

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

Accepted Answer

A)  find it more difficult to find new employment than if they had searched for a new job soon after they were laid off. 
B)  find it easier to find new employment than if they had searched for a new job soon after they were laid off. 
C)  find that they have little to no chance to find new employment after being unemployed for so long. 
D)  find that the extra unemployment benefits they receive during their extended period of unemployment more than make up for the difficulty in finding a job once they decide to re-enter the workforce. 
A)  find it more difficult to find new employment than if they had searched for a new job soon after they were laid off. 
B)  find it easier to find new employment than if they had searched for a new job soon after they were laid off. 
C)  find that they have little to no chance to find new employment after being unemployed for so long. 
D)  find that the extra unemployment benefits they receive during their extended period of unemployment more than make up for the difficulty in finding a job once they decide to re-enter the workforce.

Question 20

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

Accepted Answer

A)  The actual real wage will be lower than the expected real wage. 
B)  The actual real wage will be higher than the expected real wage. 
C)  The actual real wage will be equal to the expected real wage. 
D)  The relationship between the actual real wage and the expected real wage cannot be predicted. 
A)  The actual real wage will be lower than the expected real wage. 
B)  The actual real wage will be higher than the expected real wage. 
C)  The actual real wage will be equal to the expected real wage. 
D)  The relationship between the actual real wage and the expected real wage cannot be predicted.

When inflation is very low,how do workers and firms adjust their expectations of inflation?

Matt's real wage in 2012 is $26.80.If the price level is 104,what is Matt's nominal wage?

A decrease in expected inflation will

Workers at a local mining company are paid $25.60 per hour,and they have incorporated a 3 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 5 percent will affect the real wage and the unemployment rate.

If workers and firms raise their inflation expectations,

If the Federal Reserve's announcements about upcoming monetary policy decisions are not credible,which of the following would you expect to see?

The natural rate of unemployment is fixed and unchanging.

Where does the short-run Phillips curve intersect the long-run Phillips curve?

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 = 4%. The natural rate of unemployment = 6%. Last year's inflation rate = 3%. This year's inflation rate = 4%.

If workers and firms expect that inflation will be 3 percent next year,and real wages are not changing over time,by how much will nominal wages increase?

According to economists Robert Lucas and Thomas Sargent,when are the gains to accurately forecasting inflation highest?

What is the NAIRU?

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

If expected inflation rises,the long-run Phillips curve will

When will an increase in aggregate demand not result in lower unemployment rates in the short run?

What is the natural rate of unemployment?

Which of the following would be the source of a "real" business cycle?

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

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

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

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Exam 17: Inflation, unemployment, and Federal Reserve Policy

When inflation is very low,how do workers and firms adjust their expectations of inflation?

Matt's real wage in 2012 is $26.80.If the price level is 104,what is Matt's nominal wage?

A decrease in expected inflation will

Workers at a local mining company are paid $25.60 per hour,and they have incorporated a 3 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 5 percent will affect the real wage and the unemployment rate.

If workers and firms raise their inflation expectations,

If the Federal Reserve's announcements about upcoming monetary policy decisions are not credible,which of the following would you expect to see?

The natural rate of unemployment is fixed and unchanging.

Where does the short-run Phillips curve intersect the long-run Phillips curve?

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 = 4%. The natural rate of unemployment = 6%. Last year's inflation rate = 3%. This year's inflation rate = 4%.

If workers and firms expect that inflation will be 3 percent next year,and real wages are not changing over time,by how much will nominal wages increase?

According to economists Robert Lucas and Thomas Sargent,when are the gains to accurately forecasting inflation highest?

What is the NAIRU?

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

If expected inflation rises,the long-run Phillips curve will

When will an increase in aggregate demand not result in lower unemployment rates in the short run?

What is the natural rate of unemployment?

Which of the following would be the source of a "real" business cycle?

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

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

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters