Exam 17: Inflation, Unemployment, and Federal Reserve Policy

A study conducted by Alberto Alesina and Lawrence Summers concluded that countries with highly independent central banks had ________ than countries whose central banks had little independence.

Workers at a local construction company are paid $32.50 per hour,and they have incorporated a 4 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 2 percent will affect the real wages earned by these workers and the unemployment rate of these workers.

Figure 17-2 -Refer to Figure 17-2.Suppose the Fed used contractionary policy to push short-run equilibrium to point C.If the short-run equilibrium remained at point C long enough

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?

Can the Federal Reserve achieve both low inflation and low levels of unemployment? Explain.

According to real business cycle models

Why do most economists believe that it is important for a country's central bank to be independent of the rest of the country's central government?

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

A reduction in the rate of inflation is referred to as

Shondra's real wage in 2018 is $18.50.If the price level is 106,what is Shondra's nominal wage?

The natural rate of unemployment is fixed and unchanging.

Gretchen expects the price level to rise from 104 this year to 108 next year,and she is able to incorporate these expectations into her wage contract.If the price level rises to 106 next year instead of 108,which of the following will occur?

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 C in the long run?

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

According to the short-run Phillips curve,which of the following would result in high rates of unemployment?

General Motors and Toll Brothers faced consequences when the Federal Open Market Committee ________ between 2015 and 2017.This Fed action was considered partly responsible for decreasing demand for new automobiles and new houses in 2017.

________ would be the source of a "real" business cycle.

Use the information below to explain adjustments that move the economy to a long-run equilibrium.Assume that firms and workers have adaptive expectations. The current unemployment rate = 7%. The natural rate of unemployment = 5.5%. Last year's inflation rate = 5%. This year's inflation rate = 4%.

The policy which holds that the federal government should not allow large financial firms to fail,for fear of damaging the financial system,is known as the ________ policy.

According to the short-run Phillips curve,which of the following would result in low rates of unemployment?