Question 1

If inflation falls from 11% to 5%,there is deflation.

Accepted Answer

A) True 
 B)False

Question 2

Over the past two decades,whenever changes in Fed policy have been announced,

Accepted Answer

A)  the changes have actually taken place. 
B)  a majority of lawmakers did not believe the changes would actually take place. 
C)  the changes have rarely taken place. 
D)  Congress has taken steps to negate the changes more than 50 percent of the time. 
A)  the changes have actually taken place. 
B)  a majority of lawmakers did not believe the changes would actually take place. 
C)  the changes have rarely taken place. 
D)  Congress has taken steps to negate the changes more than 50 percent of the time.

Question 3

Figure 28-2
  
-Refer to Figure 28-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

Accepted Answer

A)  eventually move to point A 
B)  eventually move to point B 
C)  stay at point C 
D)  move to point A and then back to point B 
A)  eventually move to point A 
B)  eventually move to point B 
C)  stay at point C 
D)  move to point A and then back to point B

Question 4

Workers and firms are currently expecting the price level to increase from 110 to 114.The Federal Reserve then announces that it will be reducing the growth rate of the money supply.If the Fed's announcement is credible,and firms and workers have rational expectations,describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.

Accepted Answer

Workers and firms were expecting an infl

Question 5

What can the Federal Reserve do to reduce the natural rate of unemployment?

Accepted Answer

A)  nothing 
B)  follow expansionary monetary policy that will increase inflation 
C)  follow expansionary monetary policy that will reduce inflation 
D)  follow contractionary monetary policy that will increase inflation 
A)  nothing 
B)  follow expansionary monetary policy that will increase inflation 
C)  follow expansionary monetary policy that will reduce inflation 
D)  follow contractionary monetary policy that will increase inflation

Question 6

A study conducted by Robert Shiller,a Yale Economist,found that a large majority of the public thinks that increases in inflation will not quickly lead to an increase in wages.

Accepted Answer

A) True 
 B)False

Question 7

Figure 28-4
  
-Refer to Figure 28-4.A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock,like that pursued by Volcker in 1979,would result in a movement from ________.

Accepted Answer

A)  A to D to C 
B)  A to B 
C)  C to D to A 
D)  C to A 
E)  A to C 
A)  A to D to C 
B)  A to B 
C)  C to D to A 
D)  C to A 
E)  A to C

Question 8

A decrease in the level of cyclical unemployment will shift the long-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 9

Figure 28-4
  
-Refer to Figure 28-4.Fed Chairman Paul Volcker's response to high inflation of the late 1970s is depicted in the figure above as a movement from ________.

Accepted Answer

A)  A to D to C 
B)  C to B to A 
C)  C to D to A 
D)  C to E to B 
E)  A to B to C 
A)  A to D to C 
B)  C to B to A 
C)  C to D to A 
D)  C to E to B 
E)  A to B to C

Question 10

What is a "structural" relationship?

Accepted Answer

A)  a relationship that depends on the size of firm investments in capital such as buildings and other structures 
B)  a relationship that depends on the basic behavior of consumers and firms and remains unchanged over long periods 
C)  a relationship between any two variables that is temporary 
D)  any relationship that cannot be anticipated 
A)  a relationship that depends on the size of firm investments in capital such as buildings and other structures 
B)  a relationship that depends on the basic behavior of consumers and firms and remains unchanged over long periods 
C)  a relationship between any two variables that is temporary 
D)  any relationship that cannot be anticipated

Question 11

Assume the actual unemployment rate is equal to the nonaccelerating inflation rate of unemployment (NAIRU)of 5 percent.If the Fed wants to raise the inflation rate permanently from 1 percent to 3 percent,it should ________ the target for the federal funds rate so the economy's equilibrium moves ________ along the short-run Phillips curve.

Accepted Answer

A)  raise; up 
B)  raise; down 
C)  lower; up 
D)  lower; down 
A)  raise; up 
B)  raise; down 
C)  lower; up 
D)  lower; down

Question 12

Employees at the university have negotiated a 5 percent increase in wages for the next year,based on their inflation expectations.If inflation is actually 6 percent over the next year,which of the following will occur?

Accepted Answer

A)  Unemployment of university employees will rise. 
B)  Real wages for university employees will fall. 
C)  Inflation will be 5 percent the following year. 
D)  The increase in inflation is expected. 
A)  Unemployment of university employees will rise. 
B)  Real wages for university employees will fall. 
C)  Inflation will be 5 percent the following year. 
D)  The increase in inflation is expected.

Question 13

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers may have

Accepted Answer

A)  had adaptive expectations. 
B)  had rational expectations but didn't trust Fed announcements. 
C)  preferred high unemployment to high inflation. 
D)  Both A and B are correct answers. 
A)  had adaptive expectations. 
B)  had rational expectations but didn't trust Fed announcements. 
C)  preferred high unemployment to high inflation. 
D)  Both A and B are correct answers.

Question 14

Growth in aggregate demand will

Accepted Answer

A)  cause deflation. 
B)  increase unemployment. 
C)  move the economy to a higher point on the short-run Phillips curve. 
D)  cause the short-run Phillips curve to shift to the left. 
A)  cause deflation. 
B)  increase unemployment. 
C)  move the economy to a higher point on the short-run Phillips curve. 
D)  cause the short-run Phillips curve to shift to the left.

Question 15

A reduction in the rate of inflation is referred to as

Accepted Answer

A)  unemployment. 
B)  recession. 
C)  disinflation. 
D)  deflation. 
A)  unemployment. 
B)  recession. 
C)  disinflation. 
D)  deflation.

If inflation falls from 11% to 5%,there is deflation.

Over the past two decades,whenever changes in Fed policy have been announced,

Figure 28-2 -Refer to Figure 28-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

What can the Federal Reserve do to reduce the natural rate of unemployment?

A study conducted by Robert Shiller,a Yale Economist,found that a large majority of the public thinks that increases in inflation will not quickly lead to an increase in wages.

Figure 28-4 -Refer to Figure 28-4.A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock,like that pursued by Volcker in 1979,would result in a movement from ________.

A decrease in the level of cyclical unemployment will shift the long-run Phillips curve.

Figure 28-4 -Refer to Figure 28-4.Fed Chairman Paul Volcker's response to high inflation of the late 1970s is depicted in the figure above as a movement from ________.

What is a "structural" relationship?

Employees at the university have negotiated a 5 percent increase in wages for the next year,based on their inflation expectations.If inflation is actually 6 percent over the next year,which of the following will occur?

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers may have

Growth in aggregate demand will

A reduction in the rate of inflation is referred to as

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

If inflation falls from 11% to 5%,there is deflation.

Over the past two decades,whenever changes in Fed policy have been announced,

Figure 28-2 -Refer to Figure 28-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

What can the Federal Reserve do to reduce the natural rate of unemployment?

A study conducted by Robert Shiller,a Yale Economist,found that a large majority of the public thinks that increases in inflation will not quickly lead to an increase in wages.

Figure 28-4 -Refer to Figure 28-4.A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock,like that pursued by Volcker in 1979,would result in a movement from ________.

A decrease in the level of cyclical unemployment will shift the long-run Phillips curve.

Figure 28-4 -Refer to Figure 28-4.Fed Chairman Paul Volcker's response to high inflation of the late 1970s is depicted in the figure above as a movement from ________.

What is a "structural" relationship?

Employees at the university have negotiated a 5 percent increase in wages for the next year,based on their inflation expectations.If inflation is actually 6 percent over the next year,which of the following will occur?

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers may have

Growth in aggregate demand will

A reduction in the rate of inflation is referred to as

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