Exam 13: Inflation, Unemployment, and Bank of Canada 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.

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

The increases in oil prices in 1974 due to OPEC's actions caused the short-run aggregate supply curve to shift to the left.Canada saw increases in both unemployment and inflation as a result.The Bank of Canada could not address both increased unemployment and increased inflation because

What is the natural rate of unemployment?

An increase in the level of structural unemployment will shift the long-run Phillips curve.

Disinflation refers to

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

Canadians have loaded up on debt to historic levels; per capita debt is over 165 percent of disposable income, mirroring that of the United States prior to the subprime financial crisis.The primary cause for this is

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 4 percent over the next year, which of the following will occur?

What actions could the Bank of Canada take to achieve consistent growth in real GDP at 4 percent per year?

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?

Figure 13.6 Alt text for Figure 13.6: In figure 13.6, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.6: The x-axis is labelled, unemployment rate percent.The y-axis is labelled, inflation rate percent per year.A straight line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the end of the x-axis.A straight line labelled, long-run Philips Curve is perpendicular to the x-axis, and begins from the x-axis value 5.Long-run Philips Curve intersects the short-run Philips Curve at point A (5, 2), near the bottom of the line and passes through point C (5, 4.8%)near the top end.Point B (3%, 4.8%)is plotted near the left end of the short-run Philips Curve, with the same y-axis value as point C.The points are connected to their respective coordinates on the x and y-axes with dotted lines. -Refer to Figure 13.6.If firms and workers have rational expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

If unemployment persists for a long period of time, the natural rate of unemployment rises.

If actual inflation is greater than expected inflation,

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.

What can the Bank of Canada do to reduce the natural rate of unemployment?

The price level in the economy between 2017 and 2018 rose from 130 to 135.Between 2018 and 2019, the price level rose from 135 to 140.19.How does the short-run Phillips curve predict the unemployment rate will change as a result?

In conducting monetary policy, how has the Bank of Canada enhanced its credibility?

Figure 13.7 Alt text for Figure 13.7: In figure 13.7, a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.7: The x-axis is labelled, unemployment rate percent.The y-axis is labelled, inflation rate percent per year.A line labelled, short-run Philips Curve, begins at the top left corner and slopes down to the end of the x-axis.A line labelled, long-run Philips Curve, is perpendicular to the x-axis, and begins at the x-axis value 5.5%.Long-run Philips curve intersects short-run Philips Curve, at point (5.5%, 10%)just past the midpoint of both lines.Point (7.5, 5)is plotted close to the right end of the short-run Philips Curve.The points are connected to their respective coordinates on the x and y-axes with dotted lines. -Refer to Figure 13.7.Consider the Phillips curves depicted in the graph above.The Bank of Canada announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If expectations of inflation are not altered by the Bank of Canada's announcement, the rate of unemployment will be ________ in the short run.

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?