Exam 17: Inflation, Unemployment, and Federal Reserve Policy

Figure 17-1 -Refer to Figure 17-1.What should the Federal Reserve do if it wants to move from point A to point B in the short-run Phillips curve depicted in the figure above?

An increase in the inflation rate increases employment only if the increase in inflation is unexpected.

What is the NAIRU?

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.

If actual inflation is less than expected inflation,actual real wages will be ________ expected real wages and unemployment will ________.

If wages and prices adjust slowly,we would expect expansionary monetary policy to be

If the economy is producing ________,unemployment is at its natural rate.

Figure 17-2 -Refer to Figure 17-2.The nonaccelerating inflation rate of unemployment,or NAIRU,is associated with which point rate in the figure above?

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

Which of the following would be the source of a "real" business cycle?

Proponents of the new classical macroeconomics do not believe which of the following?

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.

When a central bank makes joint decisions with the government's Treasury department,

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?

If the long-run aggregate supply curve is vertical

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.

The natural rate of unemployment equals

If the Federal Reserve wants to reduce inflation from 4 percent to 3 percent permanently,how can that goal be achieved,and what impact will that have on employment in the short run and the long run? Support your answer with a graph of the Phillips curve in the short run and the long run.

Figure 17-1 -Refer to Figure 17-1.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 B in the long run?

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.