Exam 28: Inflation, unemployment, and Federal Reserve Policy

Robert Shiller posed the following question to workers: "Imagine that next year the inflation rate unexpectedly doubles.How long would it probably take,in these times,before your income is increased enough so that you can afford the same things as you do today?" Shiller found that ________ percent of the workers he interviewed reported that it would take several years to restore the purchasing power of their wages or that this power would never be restored.

At the point where actual inflation is equal to expected inflation

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

Monetary policy has ________ impact on the long-run Phillips curve.

Figure 28-7 -Refer to Figure 28-7.Consider the Phillips curves depicted in the graph above.The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year,and it succeeds.If the assumptions of the rational expectations school hold true,and the Fed's announcement is credible,the rate of unemployment will be ________ in the short run.

In the 1960s,many economists and policy makers considered the trade-off between inflation and unemployment revealed in the Phillips curve to be permanent.This belief was challenged by ________,who argued that there is no trade-off between inflation and unemployment and the long run.

Which of the following could increase unemployment and inflation simultaneously?

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

Growth in aggregate demand will

When will a decrease in aggregate demand not result in a lower inflation rate in the short run?

If actual inflation is greater than expected inflation,what is the relationship between the actual real wage and the expected real wage?

Disinflation refers to

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?

If wages and prices adjust rapidly,we would expect expansionary monetary policy to be

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

Employees at the hospital have negotiated a 3 percent increase in wages for the next year,based on their inflation expectations.If inflation is actually 5 percent over the next year,which of the following will occur?

Matt's real wage in 2014 is $26.80.If the price level is 104,what is Matt's nominal wage?

What is the NAIRU?

Can the Federal Reserve achieve both low inflation and low levels of unemployment? Explain.

The price level in the economy between 2014 and 2015 rose from 100 to 105.Between 2015 and 2016,the price level rose from 105 to 110.25.How does the short-run Phillips curve predict the unemployment rate will change as a result?