Exam 17: Inflation, Unemployment, and Federal Reserve Policy

Suppose that last year the unemployment rate was 5 percent and the inflation rate was 2.5 percent.If the natural rate of unemployment is 5 percent,how do you expect inflation to change?

It has been argued that the experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers

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

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

The short-run Phillips curve is ________ than the long-run Phillips curve.

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A in the figure above.Which of the following is true?

The price level in the economy between 2016 and 2017 rose from 100 to 110.Between 2017 and 2018,the price level rose from 110 to 121.How does the short-run Phillips curve predict the unemployment rate will change as a result?

What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?

In a graph of unemployment rates (on the horizontal axis)versus inflation rates (on the vertical axis),the short-run Phillips Curve is

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?

Which of the following would decrease the natural rate of unemployment?

Figure 17-7 -Refer to Figure 17-7.Consider the Phillips curves depicted in the graph above.The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year,and it succeeds.If the assumptions of the rational expectations school hold true,and the Fed's announcement is credible,the rate of unemployment will be ________ in the short run.

A decrease in expected inflation will

During which of the following time periods did inflation remain above 5 percent every year?

If inflation falls from 11% to 5%,there is deflation.

At the point where actual inflation is equal to expected inflation

If actual inflation is greater than expected inflation