Question 1

If actual inflation is greater than expected inflation,

Accepted Answer

A) real wages rise. 
B) real wages fall. 
C) the Phillips curve is a vertical line. 
D) the unemployment rate rises. 
A) real wages rise. 
B) real wages fall. 
C) the Phillips curve is a vertical line. 
D) the unemployment rate rises.

Question 2

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

Accepted Answer

A) negatively sloped 
B) positively sloped 
C) vertical 
D) horizontal 
A) negatively sloped 
B) positively sloped 
C) vertical 
D) horizontal

Question 3

A decrease in aggregate demand will

Accepted Answer

A) cause inflation. 
B) decrease unemployment. 
C) move the economy to a lower point on the short-run Phillips curve. 
D) cause the short-run Phillips curve to shift to the right. 
A) cause inflation. 
B) decrease unemployment. 
C) move the economy to a lower point on the short-run Phillips curve. 
D) cause the short-run Phillips curve to shift to the right.

Question 4

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?

Accepted Answer

A) Buy treasury bills. 
B) Sell treasury bills. 
C) Lower the discount rate. 
D) Increase the money supply. 
E) No policy will move the economy to point C in the long run. 
A) Buy treasury bills. 
B) Sell treasury bills. 
C) Lower the discount rate. 
D) Increase the money supply. 
E) No policy will move the economy to point C in the long run.

Question 5

The actual real wage is lower than the expected real wage if

Accepted Answer

A) actual inflation is less than expected inflation. 
B) expected inflation is less than actual inflation. 
C) actual unemployment is less than expected unemployment. 
D) actual unemployment is less than actual inflation. 
A) actual inflation is less than expected inflation. 
B) expected inflation is less than actual inflation. 
C) actual unemployment is less than expected unemployment. 
D) actual unemployment is less than actual inflation.

Question 6

In conducting monetary policy,how has the Federal Reserve enhanced its credibility?

Accepted Answer

A) by not following through with changes it has announced 
B) by revealing the Fed's target for the federal funds rate 
C) by keeping the minutes of the open market committee meetings confidential 
D) by marketing and increased expenditure on advertising 
A) by not following through with changes it has announced 
B) by revealing the Fed's target for the federal funds rate 
C) by keeping the minutes of the open market committee meetings confidential 
D) by marketing and increased expenditure on advertising

Question 7

A decrease in cyclical unemployment will

Accepted Answer

A) shift the long-run Phillips curve to the left. 
B) decrease the natural rate of unemployment. 
C) shift the short-run Phillips curve to the left. 
D) All of the above are correct. 
E) None of the above is correct. 
A) shift the long-run Phillips curve to the left. 
B) decrease the natural rate of unemployment. 
C) shift the short-run Phillips curve to the left. 
D) All of the above are correct. 
E) None of the above is correct.

Question 8

In an effort to discover whether or not workers understand inflation,economist Robert Shiller conducted a survey.When asked about the effect of general inflation on their wages or salary,the most popular response coming from workers was:

Accepted Answer

A) "My wages usually catch up to rising prices within a year." 
B) "The price increase will create extra profit for my employer....There will be no affect on my pay." 
C) "My wages have always increased by more than the rate of inflation." 
D) None of the above is correct. 
A) "My wages usually catch up to rising prices within a year." 
B) "The price increase will create extra profit for my employer....There will be no affect on my pay." 
C) "My wages have always increased by more than the rate of inflation." 
D) None of the above is correct.

Question 9

If the Federal Reserve announces that its target for the federal funds rate is rising from 4 percent to 4.25 percent,how do you expect workers and firms to react?

Accepted Answer

A) As long as the Fed's announcement is credible,workers and firms will increase their consumption and investment spending,which will increase aggregate demand and inflation. 
B) As long as the Fed's announcement is credible,workers and firms will reduce their consumption and investment spending,which will reduce aggregate demand and reduce inflation. 
C) If the Fed's announcement is not credible,workers and firms will not expect inflation to fall so they will reduce their consumption and investment spending,which will increase aggregate demand and reduce inflation. 
D) Workers and firms will incorporate the increase in interest rates into their expectations of inflation,and they will expect inflation to rise as a result of Fed's policy announcement. 
A) As long as the Fed's announcement is credible,workers and firms will increase their consumption and investment spending,which will increase aggregate demand and inflation. 
B) As long as the Fed's announcement is credible,workers and firms will reduce their consumption and investment spending,which will reduce aggregate demand and reduce inflation. 
C) If the Fed's announcement is not credible,workers and firms will not expect inflation to fall so they will reduce their consumption and investment spending,which will increase aggregate demand and reduce inflation. 
D) Workers and firms will incorporate the increase in interest rates into their expectations of inflation,and they will expect inflation to rise as a result of Fed's policy announcement.

Question 10

What is the relationship between the short-run Phillips curve and the long-run Phillips curve?

Accepted Answer

Along the short-run Phillips curve,the e

Question 11

If the Federal Reserve wants to reduce inflation from 4 percent to 3 percent permanently,how can that goal be achieved,and what impact will that have on employment in the short run and the long run? Support your answer with a graph of the Phillips curve in the short run and the long run.

Accepted Answer

If the Fed wants to reduce inflation,it

Question 12

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

Accepted Answer

A) buy treasury bills 
B) sell treasury bills 
C) raise the discount rate 
D) decrease the money supply 
E) raise taxes 
A) buy treasury bills 
B) sell treasury bills 
C) raise the discount rate 
D) decrease the money supply 
E) raise taxes

Question 13

According to the short-run Phillips curve,if unemployment is 3.2% and inflation is 1.3%,an increase in the inflation rate might result in which of the following?

Accepted Answer

A) an increase in the unemployment rate to 3.4% 
B) a decrease in the unemployment rate to 3.0% 
C) a decrease in the demand for labor in the economy 
D) a return to the original inflation rate of 1.3% 
A) an increase in the unemployment rate to 3.4% 
B) a decrease in the unemployment rate to 3.0% 
C) a decrease in the demand for labor in the economy 
D) a return to the original inflation rate of 1.3%

Question 14

If the long-run aggregate supply curve is vertical,

Accepted Answer

A) the economy stays at the natural rate of inflation in the long run. 
B) the short-run Phillips curve must be vertical. 
C) unemployment and inflation are positively related in the long run. 
D) the trade-off between unemployment and inflation cannot be permanent. 
A) the economy stays at the natural rate of inflation in the long run. 
B) the short-run Phillips curve must be vertical. 
C) unemployment and inflation are positively related in the long run. 
D) the trade-off between unemployment and inflation cannot be permanent.

Question 15

The curve showing the short-run relationship between the ________ and the ________ is called the Phillips curve.

Accepted Answer

A) nominal interest rate; real interest rate 
B) unemployment rate; inflation rate 
C) price level; real GDP 
D) exchange rate; real interest rate 
A) nominal interest rate; real interest rate 
B) unemployment rate; inflation rate 
C) price level; real GDP 
D) exchange rate; real interest rate

Question 16

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

Question 17

When inflation is very low,how do workers and firms adjust their expectations of inflation?

Accepted Answer

A) They rapidly adjust their expectations of inflation upward. 
B) They rapidly adjust their expectations of inflation downward. 
C) They tend to ignore inflation. 
D) They are more aggressive in asking for wage and price increases. 
A) They rapidly adjust their expectations of inflation upward. 
B) They rapidly adjust their expectations of inflation downward. 
C) They tend to ignore inflation. 
D) They are more aggressive in asking for wage and price increases.

Question 18

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?

Accepted Answer

A) Gretchen's real wage will be unchanged. 
B) Gretchen's real wage will fall. 
C) Gretchen's real wage will rise. 
D) Gretchen's real wage may rise or fall,depending on the unemployment rate. 
A) Gretchen's real wage will be unchanged. 
B) Gretchen's real wage will fall. 
C) Gretchen's real wage will rise. 
D) Gretchen's real wage may rise or fall,depending on the unemployment rate.

Question 19

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

Accepted Answer

A) The actual real wage is lower than the expected real wage. 
B) The actual real wage is higher than the expected real wage. 
C) The actual real wage is equal to the expected real wage. 
D) The relationship between the actual real wage and the expected real wage cannot be predicted. 
A) The actual real wage is lower than the expected real wage. 
B) The actual real wage is higher than the expected real wage. 
C) The actual real wage is equal to the expected real wage. 
D) The relationship between the actual real wage and the expected real wage cannot be predicted.

Question 20

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

Accepted Answer

The short-run Phillips curve has a negat

If actual inflation is greater than expected inflation,

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

A decrease in aggregate demand will

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?

The actual real wage is lower than the expected real wage if

In conducting monetary policy,how has the Federal Reserve enhanced its credibility?

A decrease in cyclical unemployment will

In an effort to discover whether or not workers understand inflation,economist Robert Shiller conducted a survey.When asked about the effect of general inflation on their wages or salary,the most popular response coming from workers was:

If the Federal Reserve announces that its target for the federal funds rate is rising from 4 percent to 4.25 percent,how do you expect workers and firms to react?

What is the relationship between the short-run Phillips curve and the long-run Phillips curve?

If the Federal Reserve wants to reduce inflation from 4 percent to 3 percent permanently,how can that goal be achieved,and what impact will that have on employment in the short run and the long run? Support your answer with a graph of the Phillips curve in the short run and the long run.

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

According to the short-run Phillips curve,if unemployment is 3.2% and inflation is 1.3%,an increase in the inflation rate might result in which of the following?

If the long-run aggregate supply curve is vertical,

The curve showing the short-run relationship between the and the is called 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?

When inflation is very low,how do workers and firms adjust their expectations of inflation?

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?

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

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

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

If actual inflation is greater than expected inflation,

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

A decrease in aggregate demand will

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?

The actual real wage is lower than the expected real wage if

In conducting monetary policy,how has the Federal Reserve enhanced its credibility?

A decrease in cyclical unemployment will

In an effort to discover whether or not workers understand inflation,economist Robert Shiller conducted a survey.When asked about the effect of general inflation on their wages or salary,the most popular response coming from workers was:

If the Federal Reserve announces that its target for the federal funds rate is rising from 4 percent to 4.25 percent,how do you expect workers and firms to react?

What is the relationship between the short-run Phillips curve and the long-run Phillips curve?

If the Federal Reserve wants to reduce inflation from 4 percent to 3 percent permanently,how can that goal be achieved,and what impact will that have on employment in the short run and the long run? Support your answer with a graph of the Phillips curve in the short run and the long run.

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

According to the short-run Phillips curve,if unemployment is 3.2% and inflation is 1.3%,an increase in the inflation rate might result in which of the following?

If the long-run aggregate supply curve is vertical,

The curve showing the short-run relationship between the ________ and the ________ is called 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?

When inflation is very low,how do workers and firms adjust their expectations of inflation?

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?

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

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

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

The curve showing the short-run relationship between the and the is called the Phillips curve.