Exam 17: Inflation, unemployment, and Federal Reserve Policy

In the long run,the Federal Reserve can control which of the following?

The price level in the economy between 2009 and 2010 rose from 100 to 105.Between 2010 and 2011,the price level rose from 105 to 110.25.How does the short-run Phillips curve predict the unemployment rate will change as a result?

In the long run,the Phillips curve is a ________ at ________.

An increase in the inflation rate increases employment only if the increase in inflation is unexpected.

Even if expectations of inflation are rational,sluggish adjustment of wages and prices will still create a short-run trade-off between inflation and unemployment.

According to real business cycle models,

A higher inflation rate can lead to lower unemployment if ________ mistakenly expect the inflation rate to be lower than it turns out to be.

Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008.Which of the following was one of those actions?

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

An increase in the expected inflation rate will

If the economy is producing at potential GDP,

Figure 28-2 -Refer to Figure 28-2.Suppose the economy is at point A in the figure above.Which of the following is true?

Figure 28-3 -Refer to Figure 28-3.If firms and workers have adaptive expectations,an expansionary monetary policy will cause the short-run equilibrium to move from

If weak aggregate demand is pushing the economy into recession,which of the following must be true?

The long-run aggregate supply curve is ________,while the long-run Phillips curve is ________.

If the long-run aggregate supply curve is vertical,

If the current unemployment rate is 5%,under which of the following circumstances would you expect the Fed to use expansionary monetary policy?

Figure 28-1 -Refer to Figure 28-1.What should the Federal Reserve do if it wants to move from point A to point B in the short-run Phillips curve depicted in the figure above?

When unemployment is below its natural rate,the inflation rate will eventually

Figure 28-1 -Refer to Figure 28-1.Suppose that the economy is currently at point A.If the Federal Reserve engaged in contractionary monetary policy,where would the economy end up in the short run?