Exam 17: Inflation, unemployment, and Federal Reserve Policy

According to the "rational expectations" school of thought in macroeconomics,the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.

Figure 28-6 -________ would be the source of a "real" business cycle.

Workers at a local construction company are paid $32.50 per hour,and they have incorporated a 4 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 2 percent will affect the real wages earned by these workers and the unemployment rate of these workers.

CarMax benefitted when the Federal Reserve ________ in 2008.This Fed action would help increase demand for its used cars,which would allowed Carmax to increase employment and increase prices.

Shondra's real wage in 2012 is $18.50.If the price level is 106,what is Shondra's nominal wage?

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

Why do most economists believe that it is important for a country's central bank to be independent of the rest of the country's central government?

Figure 28-6 -What impact does expansionary monetary policy have on the short-run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?

In a graph of unemployment rates (on the horizontal axis)versus inflation rates (on the vertical axis),the short-run Phillips Curve is

A decrease in cyclical unemployment will

In an effort to discover whether or not workers understand inflation,economist Robert Shiller conducted a survey. When asked about the effect of general inflation on their wages or salary,the most popular response coming from workers was:

A relationship that depends on the basic behavior of consumers and firms and remains unchanged over long periods is called a ________ relationship.

All other factors held constant,increased growth in aggregate demand will

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

Figure 28-3 -Refer to Figure 28-3.Consider the shift in the short-run Phillips curves shown in the above graph. This shift may be explained by

In the long run,the Fed may decrease the unemployment rate only if it is willing to increase the rate of inflation.

If the long-run aggregate supply curve is vertical,

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

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

During a time when the inflation rate is increasing each year for a number of years,are adaptive expectations or rational expectations likely to give the more accurate forecasts? Briefly explain.