Exam 17: Inflation, unemployment, and Federal Reserve Policy

If changes in inflation are higher than expected,

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

Real business cycle models argue that fluctuations in real GDP are caused by unanticipated changes in the money supply.

An increase in the expected inflation rate will

If firms and workers have rational expectations,including knowledge of the policy being used by the Federal Reserve,the short-run Phillips curve will be

Disinflation refers to

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?

Use the following information to draw a graph showing the short-run and long-run Phillips curves,and be sure your graph shows the point where the short-run and long-run Phillips curves intersect. Natural rate of unemployment = 4 percent Current rate of unemployment = 5 percent Expected inflation rate = 3 percent Current inflation rate = 2 percent

Figure 17-7 -Refer to Figure 17-7.Consider the Phillips curves depicted in the graph above.The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year,and it succeeds.If the assumptions of the rational expectations school hold true,and the Fed's announcement is credible,the rate of unemployment will be ________ in the short run.

Which of the following is an appropriate policy for a central bank to follow if the economy is plagued with deflation?

Expansionary monetary policy will result in

What impact does expansionary monetary policy have on the short-run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?

If inflation falls from 11% to 5%,there is deflation.

With which of the following statements would a "real business cycle" theorist most closely agree?

What can the Federal Reserve do to reduce the natural rate of unemployment?

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.

What is the NAIRU?

Models that focus on factors such as technology shocks rather than "monetary" explanations of fluctuations in real GDP are called

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A in the figure above.Which of the following is true?

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