Exam 17: Stabilization in an Integrated World Economy

What is the modern view of the Phillips curve?

With discretionary policy making, fiscal and monetary policies are usually

A plot of points representing the rate of inflation and the unemployment for the United States since 1953 reveals that

When a supply shock is permanent

The most important new Keynesian assumption that distinguishes this theory differs from the real-business-cycle theory is the new Keynesian assumption

The hypothesis suggesting that people combine the effects of past policy changes on economic variables with their own judgment about the future effects of current and future economic policy is referred to as the

According to the text, minimum-wage laws cause increases in

Critics of the Phillips curve argue that in the long run,

If everyone in the economy correctly anticipates the inflation rate, the unemployment rate

Which of the following is NOT associated with the new Keynesian economics?

-Refer to the above figure. The rational expectations hypothesis implies that an anticipated decrease in aggregate demand from to will

An unexpected decrease in aggregate demand

According to the real business cycle theory, which of the following would be a real disturbance to the economy?

On average, the greater the unexpected decline in aggregate demand,

-Suppose the economy is initially operating at point A in the above figure. Which of the following statements is true?

-In the above figure, if we start at and , and the money supply increases unexpectedly, what causes the economy to get to the long-run equilibrium?

The idea of policy making taking place in response to a predetermined set of rules is referred to as

Under the rational expectations hypothesis, if wages adjust rapidly to new information about intended policy actions, monetary policy can have an effect

When workers and employers correctly anticipate the rate of inflation,

The Phillips curve shows the relationship between