Exam 17: Stabilization in an Integrated World Economy

Which of the following statements is consistent with the rational expectations hypothesis?

Structural unemployment is likely to be affected by

In the case of a permanent negative supply shock

-In the above figure, if we start at AD1 and SRAS1, and the money supply increases unexpectedly, what would be the long-run equilibrium?

-Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run

Suppose the economy is initially operating at point A in the above figure. Which of the following statements is TRUE?

-In the above figure, suppose the economy is in equilibrium at point A. The Fed engages in an expansionary monetary policy that is fully anticipated by the public. Other things being equal, what point represents the new equilibrium according to the rational expectations theory?

Which of the following statements concerning price rigidity is TRUE?

Which of the following statements has been proposed as a benefit of passive policymaking?

When workers and employers correctly anticipate the rate of inflation

Cyclical unemployment is

The natural rate of unemployment is

The Phillips curve is

A theory suggesting that price stickiness leads to sluggish short-run adjustment of the price level to variations in aggregate demand is known as

When Bono forms his future expectations for the economy using all available current data and his own judgment about future policy effects, this is known as

The hypothesis that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes is the basis of the

The idea that policy actions have no real effects in the short run if they are anticipated and no real effects in the long run is called the

According to the rational expectations hypothesis, an individual's assessment of future economic performance

According to the real business cycle theory, an increase in energy prices will

The conclusion that the economy has price flexibility, wage flexibility, and perfectly competitive markets justifies