Exam 28: Inflation, unemployment, and Federal Reserve Policy

Some economists argue that the short-run Phillips curve is not vertical,and that monetary policy can be effective in the short run.Which one of the following is not one of the reasons for this skepticism?

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?

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

What impact does expansionary monetary policy have on the short-run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?

Ceteris paribus,in the short run following a decrease in the rate of growth in aggregate demand,we would expect to see an increase in the rate of unemployment and a decrease in the rate of inflation.

When individuals use all available information about an economic variable to make a decision,expectations are

According to ________,the economy is normally at potential GDP.

If the Fed decided to reverse its policy actions implemented during the heart of the recession,the Fed would be acting to try to prevent

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

If the current unemployment rate is 5%,under which of the following circumstances would you expect the Fed to use expansionary monetary policy?

According to economists Robert Lucas and Thomas Sargent,when are the gains to accurately forecasting inflation highest?

An increase in the expected inflation rate will

Forward guidance refers to central banks

Figure 28-4 -Which of the following would decrease the natural rate of unemployment?

Evidence shows that for many people,delaying searching for a job for a year or longer after they are laid off will contribute to a deterioration of their job skills,making it harder for them to find employment.This deterioration in job skills and the subsequent retraining that is necessary to obtain employment relates to which type of unemployment?

What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?

A study conducted by Robert Shiller,a Yale Economist,found that a large majority of the public thinks that increases in inflation will not quickly lead to an increase in wages.

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

If expected inflation falls,the long-run Phillips curve will

All of the following have enhanced the Fed's credibility in conducting monetary policy except