Exam 17: Inflation, unemployment, and Federal Reserve Policy

If inflationary expectations on the part of the public increase,the trade-off between inflation and unemployment becomes worse.

If the Federal Reserve announces that its target for the federal funds rate is falling from 3 percent to 2.25 percent,how do you expect workers and firms to react?

Even if expectations of inflation are rational,sluggish adjustment of wages and prices will still create a short-run trade-off between inflation and unemployment.

If actual inflation is less than expected inflation,which of the following will be true?

According to the ________ Phillips curve,the unemployment rate and the inflation rate are negatively related.

________ would be the source of a "real" business cycle.

Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008.Which of the following was one of those actions?

Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008.Which of the following was one of those actions?

If the Fed chose to change its policy actions implemented during the heart of the recession faster than the timing suggested by the White House,this would be an indication of the Fed's

Empirical evidence shows that the short-run Phillips curve was vertical during the 1950s and 1960s.

If the Phillips curve represents a "________ relationship," then the trade-off between unemployment and inflation is permanent.

According to the short-run Phillips curve,which of the following would result in low rates of unemployment?

In the 1960s,many economists and policy makers considered the trade-off between inflation and unemployment revealed in the Phillips curve to be permanent.This belief was challenged by ________,who argued that there is no trade-off between inflation and unemployment and the long run.

In the 1960s,many economists and policymakers believed the trade-off between inflation and unemployment was permanent.

If workers and firms know that the Federal Reserve is following an expansionary monetary policy,workers and firms will expect inflation to ________ and will adjust wages so that the real wage ________.

In the decade of the ________,A.W.Phillips plotted data for Great Britain which revealed a relationship between rates of changes in wages versus unemployment rates.Economists later discovered other "Phillips Curve" relationships between rates of inflation versus unemployment rates.

Assume weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls.This explains the ________ slope of the short-run Phillips curve.

During a time when the inflation rate is increasing each year for a number of years,are adaptive expectations or rational expectations likely to give the more accurate forecasts? Briefly explain.

When individuals use all available information about an economic variable to make a decision,expectations are

Figure 17-9 -Refer to Figure 17-9.A supply shock,such as rising oil prices,would be depicted as a movement from