Exam 28: Inflation, Unemployment, and Federal Reserve Policy

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.

What is the NAIRU?

A study conducted by Alberto Alesina and Lawrence Summers concluded that countries with highly independent central banks had ________ than countries whose central banks had little independence.

If actual inflation is less than expected inflation, actual real wages will be ________ expected real wages and unemployment will ________.

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

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

Figure 28-2 -Refer to Figure 28-2. 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.

Figure 28-3 -Refer to Figure 28-3. The shifts shown in the short-run and long-run Phillips curves between period 1 and period 2 could be explained by

Growth in aggregate demand will

Figure 28-2 -Refer to Figure 28-2. Suppose the economy is at point A in the figure above. Which of the following is true?

Figure 28-9 -Refer to Figure 28-9. Fed Chairman Paul Volcker's response to the ________ of the late 1970s is depicted in the figure above as a movement from C to D to A.

An increase in the expected inflation rate will

Figure 28-9 -Refer to Figure 28-9. A supply shock, such as rising oil prices, would be depicted as a movement from

If workers and firms ignore inflation or form their inflation expectations adaptively, expansionary monetary policy will lower unemployment permanently.

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

What is the natural rate of unemployment?

In face of a negative supply shock, the Fed may avoid a rise in unemployment only if it is willing to increase the rate of inflation.