Question 1

The ________ curves are both vertical.

Accepted Answer

A) aggregate demand and short-run Phillips 
B) long-run aggregate supply and short-run Phillips 
C) long-run aggregate supply and long-run Phillips 
D) short-run aggregate supply and short-run Phillips 
A) aggregate demand and short-run Phillips 
B) long-run aggregate supply and short-run Phillips 
C) long-run aggregate supply and long-run Phillips 
D) short-run aggregate supply and short-run Phillips C

Question 2

If the Fed chose to change its policy actions implemented during the heart of the recession faster than the timing suggested by the White House,this would be an indication of the Fed's

Accepted Answer

A) lack of credibility. 
B) independence. 
C) changing its monetary policy target. 
D) frictional relationship with the White House. 
A) lack of credibility. 
B) independence. 
C) changing its monetary policy target. 
D) frictional relationship with the White House. B

Question 3

How would you expect the Fed to respond to a negative supply shock in the economy?

Accepted Answer

The Fed will follow expansionary monetary policy to increase aggregate demand,which will increase inflation and reduce unemployment,if the Fed is focused on restoring real GDP in the economy.If the Fed is focused on reducing inflation,however,it will follow contractionary monetary policy,although employment and real GDP will be negatively affected.

Question 4

Figure 28-1  
-Refer to Figure 28-1.What should the Federal Reserve do if it wants to move from point A to point C in the short-run Phillips curve depicted in the figure above?

Accepted Answer

A) buy treasury bills 
B) sell treasury bills 
C) raise the discount rate 
D) decrease the money supply 
E) raise taxes 
A) buy treasury bills 
B) sell treasury bills 
C) raise the discount rate 
D) decrease the money supply 
E) raise taxes

Question 5

One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates,leading to speculative bubbles in stocks or other financial assets as investors

Accepted Answer

A) chose to sell off these assets due to the low returns on investment. 
B) borrowed at these low interest rates to buy these assets. 
C) delayed purchasing these assets until interest rates rose. 
D) switched from investing in these assets to assets with higher risks. 
A) chose to sell off these assets due to the low returns on investment. 
B) borrowed at these low interest rates to buy these assets. 
C) delayed purchasing these assets until interest rates rose. 
D) switched from investing in these assets to assets with higher risks.

Question 6

Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by

Accepted Answer

A) workers and firms using Fed policy to predict inflation. 
B) workers and firms using all the information available to predict inflation. 
C) workers and firms rapidly adjusting wages and prices in response to changes in expectations. 
D) workers and firms being fooled by unexpected changes in monetary policy. 
A) workers and firms using Fed policy to predict inflation. 
B) workers and firms using all the information available to predict inflation. 
C) workers and firms rapidly adjusting wages and prices in response to changes in expectations. 
D) workers and firms being fooled by unexpected changes in monetary policy.

Question 7

Under Alan Greenspan,the Fed strived to hit its goals of price stability and high employment through

Accepted Answer

A) setting targets for the federal funds rate of interest. 
B) setting targets for rates of growth in the M1 and M2 money supplies. 
C) practicing discretionary monetary policy,reacting to counter-changes in the level of unemployment during recessions and booms. 
D) strict adherence to rules based strategies. 
A) setting targets for the federal funds rate of interest. 
B) setting targets for rates of growth in the M1 and M2 money supplies. 
C) practicing discretionary monetary policy,reacting to counter-changes in the level of unemployment during recessions and booms. 
D) strict adherence to rules based strategies.

Question 8

Figure 28-1  
-Refer to Figure 28-1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point C,which of the following must be true?

Accepted Answer

A) The economy is producing a level of GDP equal to potential GDP. 
B) Aggregate demand must have decreased. 
C) Equilibrium GDP at point C must be above potential GDP. 
D) The Fed conducted contractionary policy to cause the move. 
E) The Fed sold treasury bills to cause the move. 
A) The economy is producing a level of GDP equal to potential GDP. 
B) Aggregate demand must have decreased. 
C) Equilibrium GDP at point C must be above potential GDP. 
D) The Fed conducted contractionary policy to cause the move. 
E) The Fed sold treasury bills to cause the move.

Question 9

A provision of the Dodd-Frank Act of 2010 revised the Federal Reserve Act to

Accepted Answer

A) allow the Fed to make loans to investment banks. 
B) allow the Fed to make loans to any individual,partnership,or corporation in unusual and exigent circumstances. 
C) restrict the Fed's ability to make loans except to commercial banks. 
D) allow the Fed to buy commercial paper issued by nonfinancial firms. 
A) allow the Fed to make loans to investment banks. 
B) allow the Fed to make loans to any individual,partnership,or corporation in unusual and exigent circumstances. 
C) restrict the Fed's ability to make loans except to commercial banks. 
D) allow the Fed to buy commercial paper issued by nonfinancial firms.

Question 10

A "long-run exploitable Phillips curve" refers to a Phillips curve that in the long run is ________ rather than ________.

Accepted Answer

A) vertical;horizontal 
B) upward sloping;vertical 
C) horizontal;upward sloping 
D) downward sloping;vertical 
A) vertical;horizontal 
B) upward sloping;vertical 
C) horizontal;upward sloping 
D) downward sloping;vertical

Question 11

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?

Accepted Answer

If workers accurately predict the rate o

Question 12

One problem with deflation is that it can raise the real value of debt.

Accepted Answer

A) True 
 B)False

Question 13

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

Accepted Answer

A) The Fed could increase the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B) The Fed could maintain a growth rate of the money supply of 4 percent,regardless of whether inflation was rising or falling in the economy. 
C) The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D) The Fed has no direct control over real GDP in the long run,so there are no actions it could take to achieve that goal. 
A) The Fed could increase the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B) The Fed could maintain a growth rate of the money supply of 4 percent,regardless of whether inflation was rising or falling in the economy. 
C) The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D) The Fed has no direct control over real GDP in the long run,so there are no actions it could take to achieve that goal.

Question 14

A study conducted by Alberto Alesina and Lawrence Summers concluded that countries with ________ had lower inflation rates than countries with ________.

Accepted Answer

A) low rates of unemployment;high rates of unemployment 
B) a large government debt;little to no government debt 
C) no private banking system;an independent banking system 
D) highly independent central banks;central banks that have little independence 
A) low rates of unemployment;high rates of unemployment 
B) a large government debt;little to no government debt 
C) no private banking system;an independent banking system 
D) highly independent central banks;central banks that have little independence

Question 15

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

Accepted Answer

A) actual inflation is less than expected inflation. 
B) expected inflation is less than actual inflation. 
C) actual unemployment is less than expected unemployment. 
D) actual unemployment is less than actual inflation. 
A) actual inflation is less than expected inflation. 
B) expected inflation is less than actual inflation. 
C) actual unemployment is less than expected unemployment. 
D) actual unemployment is less than actual inflation.

Question 16

The natural rate of unemployment will not change following an increase in ________ unemployment.

Accepted Answer

A) cyclical 
B) frictional 
C) structural 
D) all of the above 
A) cyclical 
B) frictional 
C) structural 
D) all of the above

Question 17

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

Accepted Answer

A) A to D to C. 
B) C to B to A. 
C) C to D to A. 
D) C to E to B. 
E) A to B to C. 
A) A to D to C. 
B) C to B to A. 
C) C to D to A. 
D) C to E to B. 
E) A to B to C.

Question 18

If the actual rate of inflation exceeds the expected rate of inflation,the actual real wage is greater than the expected real wage and unemployment falls.

Accepted Answer

A) True 
 B)False

Question 19

The long-run Phillips curve is ________ than the short-run Phillips curve.

Accepted Answer

A) flatter 
B) steeper 
C) less stable 
D) more volatile 
A) flatter 
B) steeper 
C) less stable 
D) more volatile

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 28: Inflation, unemployment, and Federal Reserve Policy

The ________ curves are both vertical.

If the Fed chose to change its policy actions implemented during the heart of the recession faster than the timing suggested by the White House,this would be an indication of the Fed's

How would you expect the Fed to respond to a negative supply shock in the economy?

Figure 28-1 -Refer to Figure 28-1.What should the Federal Reserve do if it wants to move from point A to point C in the short-run Phillips curve depicted in the figure above?

One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates,leading to speculative bubbles in stocks or other financial assets as investors

Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by

Under Alan Greenspan,the Fed strived to hit its goals of price stability and high employment through

Figure 28-1 -Refer to Figure 28-1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point C,which of the following must be true?

A provision of the Dodd-Frank Act of 2010 revised the Federal Reserve Act to

A "long-run exploitable Phillips curve" refers to a Phillips curve that in the long run is ________ rather than ________.

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?

One problem with deflation is that it can raise the real value of debt.

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

A study conducted by Alberto Alesina and Lawrence Summers concluded that countries with ________ had lower inflation rates than countries with ________.

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

The natural rate of unemployment will not change following an increase in ________ unemployment.

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

If the actual rate of inflation exceeds the expected rate of inflation,the actual real wage is greater than the expected real wage and unemployment falls.

The long-run Phillips curve is ________ than the short-run Phillips curve.

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.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

A "long-run exploitable Phillips curve" refers to a Phillips curve that in the long run is rather than .

A study conducted by Alberto Alesina and Lawrence Summers concluded that countries with had lower inflation rates than countries with .