Question 1

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

Accepted Answer

If workers and firms have rational expec

Question 2

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

Accepted Answer

A) an increase in the unemployment rate. 
B) an increase in inflation that is unanticipated. 
C) a decrease in inflation that is unanticipated. 
D) a change in inflation expectations. 
A) an increase in the unemployment rate. 
B) an increase in inflation that is unanticipated. 
C) a decrease in inflation that is unanticipated. 
D) a change in inflation expectations.

Question 3

Where does the short-run Phillips curve intersect the long-run Phillips curve?

Accepted Answer

A) at the point where the rate of inflation and the unemployment rate are equal 
B) at the natural rate of inflation 
C) at the point where actual inflation is equal to expected inflation 
D) There is no intersection between the short-run and long-run Phillips curves. 
A) at the point where the rate of inflation and the unemployment rate are equal 
B) at the natural rate of inflation 
C) at the point where actual inflation is equal to expected inflation 
D) There is no intersection between the short-run and long-run Phillips curves.

Question 4

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

Accepted Answer

A) be higher than inflation rates of the past 
B) follow the pattern of inflation rates in the past 
C) be lower than inflation rates of the past 
D) not be related to inflation rates of the past 
A) be higher than inflation rates of the past 
B) follow the pattern of inflation rates in the past 
C) be lower than inflation rates of the past 
D) not be related to inflation rates of the past

Question 5

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called

Accepted Answer

A) the monetary policy curve. 
B) the Phillips curve. 
C) the Sargent curve. 
D) the unemployment curve. 
A) the monetary policy curve. 
B) the Phillips curve. 
C) the Sargent curve. 
D) the unemployment curve.

Question 6

Which of the following best explains the negative slope of the short-run Phillips curve?

Accepted Answer

A) Weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls. 
B) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. 
C) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. 
D) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change. 
A) Weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls. 
B) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. 
C) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. 
D) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change.

Question 7

The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) deflation 
B) high unemployment 
C) high inflation 
D) appreciation of the dollar 
A) deflation 
B) high unemployment 
C) high inflation 
D) appreciation of the dollar

Question 9

If the economy experiences a negative supply shock,which of the following will be true?

Accepted Answer

A) Inflation will rise,and real GDP will fall. 
B) Inflation will rise,and real GDP will rise. 
C) Inflation will fall,and real GDP will fall. 
D) Inflation will fall,and real GDP will rise. 
A) Inflation will rise,and real GDP will fall. 
B) Inflation will rise,and real GDP will rise. 
C) Inflation will fall,and real GDP will fall. 
D) Inflation will fall,and real GDP will rise.

Question 10

Figure 17-9  
-Refer to Figure 17-9.A(n)________ would be depicted as a movement from A to D to C.

Accepted Answer

A) supply shock,such as rising oil prices, 
B) increase in aggregate demand 
C) implementation of contractionary monetary policy 
D) increase in short-run aggregate supply 
A) supply shock,such as rising oil prices, 
B) increase in aggregate demand 
C) implementation of contractionary monetary policy 
D) increase in short-run aggregate supply

Question 11

Figure 17-6  
-Refer to Figure 17-6.If firms and workers have rational expectations,an expansionary monetary policy will cause the short-run equilibrium to move from

Accepted Answer

A) point B to point C. 
B) point C to point A. 
C) point A to point B. 
D) point B to point A. 
E) point A to point C. 
A) point B to point C. 
B) point C to point A. 
C) point A to point B. 
D) point B to point A. 
E) point A to point C.

Question 12

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%.

Accepted Answer

If firms and workers have adaptive expec

Question 13

The price level in the economy between 2012 and 2013 rose from 100 to 110.Between 2013 and 2014,the price level rose from 110 to 121.How does the short-run Phillips curve predict the unemployment rate will change as a result?

Accepted Answer

A) The unemployment rate will decrease since inflation decreased. 
B) The unemployment rate will decrease since inflation increased. 
C) The unemployment rate will increase since inflation increased. 
D) The unemployment rate will not change since there is no change in the rate of inflation. 
A) The unemployment rate will decrease since inflation decreased. 
B) The unemployment rate will decrease since inflation increased. 
C) The unemployment rate will increase since inflation increased. 
D) The unemployment rate will not change since there is no change in the rate of inflation.

Question 14

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?

Accepted Answer

The Fed would undertake a contractionary

Question 15

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?

Accepted Answer

A) The economy is producing a level of GDP equal to potential GDP. 
B) Aggregate demand must have increased. 
C) Equilibrium GDP at point B must be below potential GDP. 
D) The Fed conducted expansionary policy to cause the move. 
E) The Fed purchased treasury bills to cause the move. 
A) The economy is producing a level of GDP equal to potential GDP. 
B) Aggregate demand must have increased. 
C) Equilibrium GDP at point B must be below potential GDP. 
D) The Fed conducted expansionary policy to cause the move. 
E) The Fed purchased treasury bills to cause the move.

Question 16

If the unemployment rate in the economy is steady at 4 percent per year,how does the short-run Phillips curve predict that the inflation rate will be changing,if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations.Provide an appropriate graph to support your discussion.

Accepted Answer

If the unemployment rate is constant at

Question 17

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

Accepted Answer

A) a decrease in the number of younger,less skilled workers in the economy 
B) an increase in the generosity of unemployment insurance programs 
C) fewer restrictions on unions to negotiate wage changes with companies 
D) a decrease in government-sponsored programs that train unemployed workers so they can find new jobs quickly 
A) a decrease in the number of younger,less skilled workers in the economy 
B) an increase in the generosity of unemployment insurance programs 
C) fewer restrictions on unions to negotiate wage changes with companies 
D) a decrease in government-sponsored programs that train unemployed workers so they can find new jobs quickly

Question 18

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

Accepted Answer

Adaptive expectations exist when firms a

Question 19

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

Accepted Answer

A) rational expectations. 
B) adaptive expectations. 
C) unstable expectations. 
D) accommodative expectations. 
A) rational expectations. 
B) adaptive expectations. 
C) unstable expectations. 
D) accommodative expectations.

Question 20

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?

Accepted Answer

If workers accurately predict the rate o

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

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

Where does the short-run Phillips curve intersect the long-run Phillips curve?

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

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called

Which of the following best explains the negative slope of the short-run Phillips curve?

The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment.

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

If the economy experiences a negative supply shock,which of the following will be true?

Figure 17-9 -Refer to Figure 17-9.A(n)________ would be depicted as a movement from A to D to C.

Figure 17-6 -Refer to Figure 17-6.If firms and workers have rational expectations,an expansionary monetary policy will cause the short-run equilibrium to move from

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 price level in the economy between 2012 and 2013 rose from 100 to 110.Between 2013 and 2014,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?

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?

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

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

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

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?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 17: Inflation, unemployment, and Federal Reserve Policy

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

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

Where does the short-run Phillips curve intersect the long-run Phillips curve?

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

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called

Which of the following best explains the negative slope of the short-run Phillips curve?

The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment.

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

If the economy experiences a negative supply shock,which of the following will be true?

Figure 17-9 -Refer to Figure 17-9.A(n)________ would be depicted as a movement from A to D to C.

Figure 17-6 -Refer to Figure 17-6.If firms and workers have rational expectations,an expansionary monetary policy will cause the short-run equilibrium to move from

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 price level in the economy between 2012 and 2013 rose from 100 to 110.Between 2013 and 2014,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?

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?

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

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

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

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?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters