Exam 17: Inflation, Unemployment, and Federal Reserve Policy

What does it mean to say that workers and firms have rational expectations?

Figure 17-1 -Refer to Figure 17-1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point B,which of the following must be true?

If workers and firms raise their inflation expectations

If people assume that future rates of inflation will ________,they are said to have adaptive expectations.

Last year,the unemployment rate was 4 percent and the inflation rate was 3 percent.If the natural rate of unemployment is 3 percent,how do you expect inflation to change?

If firms and workers have adaptive expectations,what impact will expansionary monetary policy have on inflation,unemployment,and the Phillips curve?

If workers accurately predict the rate of inflation,is there a short-run trade-off between inflation and unemployment,as predicted by the Phillips curve? Why or why not?

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

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

If the Phillips curve represents a "structural relationship," then

The short-run Phillips curve will not shift unless there is

If the Phillips curve represents a "________ relationship," then the trade-off between unemployment and inflation is permanent.

If the current unemployment rate is 5%,under which of the following circumstances would you expect the Fed to use expansionary monetary policy?

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?

Empirical evidence shows that the short-run Phillips curve was vertical during the 1950s and 1960s.

An increase in the level of structural unemployment will shift the long-run Phillips curve.

Figure 17-3 -Refer to Figure 17-3.The shifts shown in the short-run and long-run Phillips curves between period 1 and period 2 could be explained by

Models that focus on factors other than changes in the money supply to explain fluctuations in real GDP are called

Employees at the hospital have negotiated a 3 percent increase in wages for the next year,based on their inflation expectations.If inflation is actually 5 percent over the next year,which of the following will occur?

The unemployment rate that exists when the economy is at potential GDP is called