Exam 28: Inflation, unemployment, and Federal Reserve Policy

________ would be the source of a "real" business cycle.

The natural rate of unemployment equals

Contractionary monetary policy will result in

Evidence shows that many people who delay searching for a job for a year or longer after they are laid off

If changes in inflation are higher than expected

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers

According to the short-run Phillips curve,if unemployment is 3.2% and inflation is 1.3%,an increase in the inflation rate might result in which of the following?

If changes in inflation are higher than expected

A study conducted by Alberto Alesina and Lawrence Summers concluded that countries with highly independent central banks had ________ than countries whose central banks had little independence.

If workers and firms lower their inflation expectations

Suppose a presidential candidate makes a statement in a debate whereby he promises that he would encourage the Fed to permanently lower the unemployment rate to 3%.His opponent claims that this type of policy idea is mired in the 1960s and would only cause inflation.Explain what the opponent means.

Figure 28-2 -Refer to Figure 28-2.The nonaccelerating inflation rate of unemployment,or NAIRU,is associated with which point rate in the figure above?

What impact does monetary policy have on the long-run Phillips curve?

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?

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

Figure 28-9 -Refer to Figure 28-9.A follower of the new classical macroeconomics would argue that ________ like that pursued by Paul Volcker in 1979,would result in a movement from C to A.

Suppose that last year the unemployment rate was 5 percent and the inflation rate was 2.5 percent.If the natural rate of unemployment is 5 percent,how do you expect inflation to change?

Figure 28-1 -Refer to Figure 28-1.Suppose that the economy is currently at point A.If the Federal Reserve engaged in expansionary monetary policy,where would the economy end up in the short run?

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