Exam 28: Inflation, Unemployment, and Federal Reserve Policy

In the long run, the Phillips curve is a ________ at ________.

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

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

Which of the following could increase unemployment and inflation simultaneously?

Use the information below to explain adjustments that move the economy to a long-run equilibrium. Assume that firms and workers have adaptive expectations. The current unemployment rate = 4%. The natural rate of unemployment = 6%. Last year's inflation rate = 3%. This year's inflation rate = 4%.

If workers and firms raise their inflation expectations,

When unemployment is below its natural rate, the inflation rate will eventually

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

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

The short-run Phillips curve will not shift unless there is

If weak aggregate demand is pushing the economy into recession, which of the following must be true?

If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

A decrease in aggregate demand will

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

Last year, the unemployment rate was 4 percent and the inflation rate was 3 percent. If the natural rate of unemployment is 3 percent, how do you expect inflation to change?

Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.

Figure 28-6 -Refer to Figure 28-6. If firms and workers have adaptive expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of anticipated changes in monetary policy.

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.