Exam 28: Inflation, unemployment, and Federal Reserve Policy

If the Federal Reserve chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation,which of the following would you expect to see?

If workers and firms expect that inflation will be 3 percent next year,and real wages are not changing over time,by how much will nominal wages increase?

If the economy is producing ________,unemployment is at its natural rate.

A decrease in the level of cyclical unemployment will shift the long-run Phillips curve.

Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.

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

If weak aggregate demand is pushing the economy into recession,which of the following must be true?

The key to understanding the short-run trade-off behind the Phillips curve is that an increase in inflation will decrease unemployment if the inflation is ________ by both workers and firms.

Figure 28-2 -Refer to Figure 28-2.Suppose the economy is at point A.The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?

A reduction in the rate of inflation is referred to as

In a graph of unemployment rates (on the horizontal axis)versus inflation rates (on the vertical axis),the short-run Phillips Curve is

The natural rate of unemployment is fixed and unchanging.

Proponents of the new classical macroeconomics do not believe which of the following?

If the Fed attempts to reach and maintain very low rates of unemployment,we would expect the rate of inflation to rise.

If people assume that future rates of inflation will ________,they are said to have adaptive expectations.

In the short run,the Federal Reserve can affect which of the following?

If the Phillips curve represents a "structural relationship," then

Figure 28-3 -Refer to Figure 28-3.The shifts shown in the short-run and long-run Phillips curves between period 1 and period 2 could be explained by

The short-run Phillips curve will not shift unless there is

When will an increase in aggregate demand not result in lower unemployment rates in the short run?