Exam 17: Stabilization in an Integrated World Economy

You recently graduated from college and you are actively looking for employment. The economy has completely recovered from the last recession and you are taking your time looking for the "perfect" job. In the meantime, the unemployment you are experiencing is categorized as

A macroeconomic policy action will have a longer-term effect on aggregate demand if people

An example of nondiscretionary policymaking is

-In the above figure, starting at E1, if there is a supply shock that is temporary, the

The idea of policymaking taking place in response to a predetermined set of rules is referred to as

The natural rate of unemployment has increased in the United States and Europe over the last twenty years. What are things that could account for this?

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

The rational expectations hypothesis is based on the assumption that

According to Friedman and Phelps, which of the following statements is a correct characterization of unemployment and inflation in the United States since the 1950s?

According to a theory that relies on the rational expectations hypothesis and the assumption that wages and prices are flexible, why do anticipated expansionary monetary actions NOT boost real GDP?

When policy makers take actions in response to or in anticipation of some change in the overall economy, there is

Proponents of passive policymaking believe that

One implication of coupling the rational expectations hypothesis with the assumption of flexible wages and prices is that

-In the above figure, starting at E3, if there is an increase in technology that causes a permanent increase in production capabilities

When the economy is operating at a level of real GDP that is greater than its potential level, we know that

Under the rational expectations hypothesis, if wages adjust rapidly to new information about intended policy actions, the only time that changes in government policies have real effects is when

-Refer to the above figure. Suppose the economy is in equilibrium at point A. If the Fed tries to stimulate the economy by undertaking an expansionary monetary policy action and this is NOT expected by the people in the economy, we would expect to see

-Refer to the above figure. Suppose the economy is at C. If the government tried to reduce the unemployment rate to 3 percent, the new long-run outcome will be at point

Which of the following hypotheses states that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of future and current policy changes?

A reduction in world oil supplies is likely to cause