Question 1

In the short run,the Federal Reserve can affect which of the following?

Accepted Answer

A) the inflation rate 
B) the unemployment rate 
C) the growth rate of real GDP in the economy 
D) all of the above 
A) the inflation rate 
B) the unemployment rate 
C) the growth rate of real GDP in the economy 
D) all of the above

Question 2

An increase in the inflation rate increases employment only if the increase in inflation is unexpected.

Accepted Answer

A) True 
 B)False

Question 3

A falling price level is called ________ and a fall in the rate of inflation is called ________.

Accepted Answer

A) disinflation; a contraction 
B) a contraction; disinflation 
C) disinflation; deflation 
D) deflation; disinflation 
A) disinflation; a contraction 
B) a contraction; disinflation 
C) disinflation; deflation 
D) deflation; disinflation

Question 4

Growth in aggregate demand will

Accepted Answer

A) cause deflation. 
B) increase unemployment. 
C) move the economy to a higher point on the short-run Phillips curve. 
D) cause the short-run Phillips curve to shift to the left. 
A) cause deflation. 
B) increase unemployment. 
C) move the economy to a higher point on the short-run Phillips curve. 
D) cause the short-run Phillips curve to shift to the left.

Question 5

In a graph of unemployment rates (on the horizontal axis)versus inflation rates (on the vertical axis),the short-run Phillips Curve is

Accepted Answer

A) downward sloping. 
B) horizontal. 
C) vertical. 
D) upward sloping. 
A) downward sloping. 
B) horizontal. 
C) vertical. 
D) upward sloping.

Question 6

If firms and workers have rational expectations,including knowledge of the policy being used by the Federal Reserve

Accepted Answer

A) expansionary monetary policy is especially effective. 
B) expansionary monetary policy is ineffective. 
C) expansionary monetary policy is effective in the short run,but not the long run. 
D) expansionary monetary policy is effective in the short run and the long run. 
A) expansionary monetary policy is especially effective. 
B) expansionary monetary policy is ineffective. 
C) expansionary monetary policy is effective in the short run,but not the long run. 
D) expansionary monetary policy is effective in the short run and the long run.

Question 7

In August 1979,President Jimmy Carter appointed ________ as chairman of the Board of Governors of the Federal Reserve System.

Accepted Answer

A) Ben Bernanke 
B) Alan Greenspan 
C) G.William Miller 
D) Paul Volcker 
A) Ben Bernanke 
B) Alan Greenspan 
C) G.William Miller 
D) Paul Volcker

Question 8

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

Accepted Answer

A) more likely to reduce the natural rate of unemployment. 
B) more likely to affect the unemployment rate. 
C) less likely to affect the unemployment rate. 
D) less likely to result in a vertical short-run Phillips curve. 
A) more likely to reduce the natural rate of unemployment. 
B) more likely to affect the unemployment rate. 
C) less likely to affect the unemployment rate. 
D) less likely to result in a vertical short-run Phillips curve.

Question 9

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

Accepted Answer

A) The Fed's policies will be deflationary. 
B) The Fed's policies will be inflationary. 
C) The rate of inflation will fall as the Fed tries to reduce the unemployment rate. 
D) The Fed will reduce the natural rate of unemployment. 
A) The Fed's policies will be deflationary. 
B) The Fed's policies will be inflationary. 
C) The rate of inflation will fall as the Fed tries to reduce the unemployment rate. 
D) The Fed will reduce the natural rate of unemployment.

Question 10

In the long run,the Federal Reserve can control which of the following?

Accepted Answer

A) the inflation rate 
B) the unemployment rate 
C) the growth rate of real GDP in the economy 
D) the natural rate of unemployment 
A) the inflation rate 
B) the unemployment rate 
C) the growth rate of real GDP in the economy 
D) the natural rate of unemployment

Question 11

Some economists and lawmakers believe the Fed lost some of its independence when it

Accepted Answer

A) began printing money at the directive of the White House prior to the 2008 presidential election. 
B) began working closely with the Treasury Department while dealing with the financial crisis of 2008. 
C) embarked on an expansionary monetary policy during the recession of 2007-2009. 
D) began using the federal funds rate instead of M1 and M2 as a monetary policy target. 
A) began printing money at the directive of the White House prior to the 2008 presidential election. 
B) began working closely with the Treasury Department while dealing with the financial crisis of 2008. 
C) embarked on an expansionary monetary policy during the recession of 2007-2009. 
D) began using the federal funds rate instead of M1 and M2 as a monetary policy target.

Question 12

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

Accepted Answer

Rational expectations means that workers

Question 13

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

Accepted Answer

A) The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B) The Fed could maintain a growth rate of the money supply of 4 percent,regardless of whether inflation was rising or falling in the economy. 
C) The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D) The Fed has no direct control over real GDP in the long run,so there are no actions it could take to achieve that goal. 
A) The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B) The Fed could maintain a growth rate of the money supply of 4 percent,regardless of whether inflation was rising or falling in the economy. 
C) The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D) The Fed has no direct control over real GDP in the long run,so there are no actions it could take to achieve that goal.

Question 14

Shondra's real wage in 2014 is $18.50.If the price level is 106,what is Shondra's nominal wage?

Accepted Answer

A) $19.61 
B) $18.61 
C) $18.50 
D) $17.44 
A) $19.61 
B) $18.61 
C) $18.50 
D) $17.44

Question 15

Parker Hannifin benefitted when the Federal Reserve ________ in 2008.This Fed action would help increase demand for its machinery components,which allowed Parker Hannifin to increase employment and increase prices.

Accepted Answer

A) drove down interest rates 
B) increased the discount rate 
C) lowered the required reserve rate 
D) implemented a series of open market sales of Treasury bonds 
A) drove down interest rates 
B) increased the discount rate 
C) lowered the required reserve rate 
D) implemented a series of open market sales of Treasury bonds

Question 16

If workers and firms have rational expectations,they understand that ________ monetary policy will raise the inflation rate,so actual inflation ________ expected inflation.

Accepted Answer

A) expansionary; will be equal to 
B) expansionary; will be greater than 
C) contractionary; will be equal to 
D) contractionary; will be less than 
E) expansionary; will be less than 
A) expansionary; will be equal to 
B) expansionary; will be greater than 
C) contractionary; will be equal to 
D) contractionary; will be less than 
E) expansionary; will be less than

Question 17

Monetary policy has ________ impact on the long-run Phillips curve.

Accepted Answer

A) a positive 
B) a negative 
C) an unpredictable 
D) no 
A) a positive 
B) a negative 
C) an unpredictable 
D) no

Question 18

Proponents of the new classical macroeconomics do not believe which of the following?

Accepted Answer

A) Expansionary monetary policy can be an effective policy tool. 
B) Workers and firms use information contained in Fed policy to form inflation expectations. 
C) Wages and prices will adjust rapidly in the economy. 
D) The economy will normally be at its potential level. 
A) Expansionary monetary policy can be an effective policy tool. 
B) Workers and firms use information contained in Fed policy to form inflation expectations. 
C) Wages and prices will adjust rapidly in the economy. 
D) The economy will normally be at its potential level.

Question 19

If the rate of inflation in the economy is steady at 5 percent per year,how does the short-run Phillips curve predict that the unemployment rate will be changing,if at all? Does your answer change if inflation in the economy is 0 percent? Illustrate your answer with a Phillips curve.

Accepted Answer

If the rate of inflation is constant at

Question 20

Figure 17-2  
-Refer to Figure 17-2.Suppose the economy is at point B.If the Fed increases the money supply so that inflation increases,the economy will ________ in the short run,holding all else constant.

Accepted Answer

A) eventually move to point A 
B) stay at point B 
C) eventually move to point C 
D) move to point A and then back to point B 
A) eventually move to point A 
B) stay at point B 
C) eventually move to point C 
D) move to point A and then back to point B

In the short run,the Federal Reserve can affect which of the following?

An increase in the inflation rate increases employment only if the increase in inflation is unexpected.

A falling price level is called and a fall in the rate of inflation is called .

Growth in aggregate demand will

In a graph of unemployment rates (on the horizontal axis)versus inflation rates (on the vertical axis),the short-run Phillips Curve is

If firms and workers have rational expectations,including knowledge of the policy being used by the Federal Reserve

In August 1979,President Jimmy Carter appointed ________ as chairman of the Board of Governors of the Federal Reserve System.

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

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

In the long run,the Federal Reserve can control which of the following?

Some economists and lawmakers believe the Fed lost some of its independence when it

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

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

Shondra's real wage in 2014 is $18.50.If the price level is 106,what is Shondra's nominal wage?

Parker Hannifin benefitted when the Federal Reserve ________ in 2008.This Fed action would help increase demand for its machinery components,which allowed Parker Hannifin to increase employment and increase prices.

If workers and firms have rational expectations,they understand that monetary policy will raise the inflation rate,so actual inflation expected inflation.

Monetary policy has ________ impact on the long-run Phillips curve.

Proponents of the new classical macroeconomics do not believe which of the following?

If the rate of inflation in the economy is steady at 5 percent per year,how does the short-run Phillips curve predict that the unemployment rate will be changing,if at all? Does your answer change if inflation in the economy is 0 percent? Illustrate your answer with a Phillips curve.

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point B.If the Fed increases the money supply so that inflation increases,the economy will ________ in the short run,holding all else constant.

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

In the short run,the Federal Reserve can affect which of the following?

An increase in the inflation rate increases employment only if the increase in inflation is unexpected.

A falling price level is called ________ and a fall in the rate of inflation is called ________.

Growth in aggregate demand will

In a graph of unemployment rates (on the horizontal axis)versus inflation rates (on the vertical axis),the short-run Phillips Curve is

If firms and workers have rational expectations,including knowledge of the policy being used by the Federal Reserve

In August 1979,President Jimmy Carter appointed ________ as chairman of the Board of Governors of the Federal Reserve System.

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

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

In the long run,the Federal Reserve can control which of the following?

Some economists and lawmakers believe the Fed lost some of its independence when it

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

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

Shondra's real wage in 2014 is $18.50.If the price level is 106,what is Shondra's nominal wage?

Parker Hannifin benefitted when the Federal Reserve ________ in 2008.This Fed action would help increase demand for its machinery components,which allowed Parker Hannifin to increase employment and increase prices.

If workers and firms have rational expectations,they understand that ________ monetary policy will raise the inflation rate,so actual inflation ________ expected inflation.

Monetary policy has ________ impact on the long-run Phillips curve.

Proponents of the new classical macroeconomics do not believe which of the following?

If the rate of inflation in the economy is steady at 5 percent per year,how does the short-run Phillips curve predict that the unemployment rate will be changing,if at all? Does your answer change if inflation in the economy is 0 percent? Illustrate your answer with a Phillips curve.

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point B.If the Fed increases the money supply so that inflation increases,the economy will ________ in the short run,holding all else constant.

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

A falling price level is called and a fall in the rate of inflation is called .

If workers and firms have rational expectations,they understand that monetary policy will raise the inflation rate,so actual inflation expected inflation.