Exam 17: Inflation, unemployment, and Federal Reserve Policy

Figure 28-1 -According to the short-run Phillips curve,if unemployment is 2.4% and inflation is 3.7%,a decrease in the inflation rate might result in which of the following?

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A,and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point C in the long run?

If the actual rate of inflation exceeds the expected rate of inflation,the actual real wage is greater than the expected real wage and unemployment falls.

In face of a negative supply shock,the Fed may avoid a rise in unemployment only if it is willing to increase the rate of inflation.

In a survey,Robert Shiller found that most workers believe that an increase in inflation will lead quickly to an increase in wages.

What does it mean to say that workers and firms have rational expectations?

Figure 28-4 -A decrease in aggregate demand will

If workers and firms expect that inflation will be 5 percent next year,and real wages are not changing over time,by how much will nominal wages increase?

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

If expectations are adaptive,how will the economy adjust to a new long-run equilibrium in response to expansionary monetary policy? Support your answer with a graph of the Phillips curve.

If the Federal Reserve chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation,which of the following would you expect to see?

Between July 2010 and July 2011,the Phillips curve data indicated that a rightward shift of the short-run Phillips curve may have begun.If so,this would indicate that

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?

Figure 28-7 -Refer to Figure 28-7. Fed Chairman Paul Volcker's response to the ________ of the late 1970s is depicted in the figure above as a movement from C to D to A.

If the economy experiences a ________,inflation will rise and real GDP will fall.

Figure 28-4 -When unemployment is above its natural rate,the inflation rate will eventually

Which of the following is an appropriate policy for a central bank to follow if the economy is plagued with deflation?

Figure 28-4 -In the short run,the Federal Reserve can affect which of the following?

The actual real wage is lower than the expected real wage if

If actual inflation is greater than expected inflation,