Exam 17: Inflation, Unemployment, and Federal Reserve Policy

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

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

Deflation refers to

When individuals use all available information about an economic variable to make a decision,expectations are

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

Which of the following could decrease unemployment and inflation simultaneously?

Figure 17-9 -Refer to Figure 17-9.Fed Chairman Paul Volcker's response to high inflation of the late 1970s is depicted in the figure above as a movement from

Real business cycle models argue that fluctuations in real GDP are caused by unanticipated changes in the money supply.

If the Federal Reserve announces that its target for the federal funds rate is falling from 3 percent to 2.25 percent,how do you expect workers and firms to react?

Disinflation refers to

In conducting monetary policy,how has the Federal Reserve enhanced its credibility?

If firms and workers have rational expectations,including knowledge of the policy being used by the Federal Reserve

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

If expected inflation rises,the long-run Phillips curve will

Figure 17-2 -Refer to Figure 17-2.At which point is the unemployment rate equal to the natural rate of unemployment?

When unemployment is below its natural rate,the inflation rate will eventually

In order to change inflationary expectations in 1979,the Fed's monetary policy under Paul Volcker's leadership resulted in ________ and ________.

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point C in the figure above.If workers adjust their expectations of inflation,which of the following will be true?

With which of the following statements would a "real business cycle" theorist most closely agree?

In the 1960s,many economists and policymakers believed the trade-off between inflation and unemployment was permanent.