Exam 28: Inflation, Unemployment, and Federal Reserve Policy

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.

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers may have

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

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

Which of the following best explains the negative slope of the short-run Phillips curve?

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

According to the short-run Phillips curve, the unemployment rate and the inflation rate are

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?

Which of the following would be the source of a "real" business cycle?

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

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

Figure 28-2 -Refer to Figure 28-2. Suppose the economy is at point C in the figure above. If workers adjust their expectations of inflation, which of the following will be true?

Contractionary monetary policy will result in

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

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

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

Where does the short-run Phillips curve intersect the long-run Phillips curve?

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

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?

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