Exam 17: Inflation, unemployment, and Federal Reserve Policy

If the Federal Reserve chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation,which of the following would you expect to see?

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

In face of rational expectations regarding changes in monetary policy,the short-run Phillips Curve may be vertical.

Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by

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

If actual inflation is less than expected inflation,actual real wages will be ________ expected real wages and unemployment will ________.

According to ________,the economy is normally at potential GDP.

What is a "structural" relationship?

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

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

Figure 17-1 -Refer to Figure 17-1.What should the Federal Reserve do if it wants to move from point A to point B in the short-run Phillips curve depicted in the figure above?

Alejandro expects the price level to rise from 105 this year to 108 next year.If the price level rises to 110 next year instead of 108,which of the following will occur?

All of the following have enhanced the Fed's credibility in conducting monetary policy except

A decrease in expected inflation will

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 = 4%. The natural rate of unemployment = 6%. Last year's inflation rate = 3%. This year's inflation rate = 4%.

The short-run Phillips curve will shift if there is

Workers at a local mining company are paid $25.60 per hour,and they have incorporated a 3 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 5 percent will affect the real wage and the unemployment rate.