Question 1

In conducting monetary policy,how has the Federal Reserve enhanced its credibility?

Accepted Answer

A) by not following through with changes it has announced 
B) by revealing the Fed's target for the federal funds rate 
C) by keeping the minutes of the open market committee meetings confidential 
D) by marketing and increased expenditure on advertising 
A) by not following through with changes it has announced 
B) by revealing the Fed's target for the federal funds rate 
C) by keeping the minutes of the open market committee meetings confidential 
D) by marketing and increased expenditure on advertising

Question 2

Use the following information to draw a graph showing the short-run and long-run Phillips curves,and be sure your graph shows the point where the short-run and long-run Phillips curves intersect.
Natural rate of unemployment = 4 percent
Current rate of unemployment = 5 percent
Expected inflation rate = 3 percent
Current inflation rate = 2 percent

Accepted Answer

The answer of Use the following information to draw a...

Question 3

If actual inflation is less than expected inflation,actual real wages will be ________ expected real wages and unemployment will ________.

Accepted Answer

A) greater than;rise 
B) greater than;fall 
C) less than;rise 
D) less than;fall 
A) greater than;rise 
B) greater than;fall 
C) less than;rise 
D) less than;fall

Question 4

Suppose the current inflation rate and the expected inflation rate are both 3 percent.The current unemployment rate and the natural rate of unemployment are both 4 percent.Use a Phillips curve graph to show the effect on the economy of a severe supply shock.If the Federal Reserve keeps monetary policy unchanged,what will eventually happen to the unemployment rate? Show this on your Phillips curve graph.

Accepted Answer

The supply shock will shift the short-ru

Question 5

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

Accepted Answer

A) The actual real wage is lower than the expected real wage. 
B) The actual real wage is higher than the expected real wage. 
C) The actual real wage is equal to the expected real wage. 
D) The relationship between the actual real wage and the expected real wage cannot be predicted. 
A) The actual real wage is lower than the expected real wage. 
B) The actual real wage is higher than the expected real wage. 
C) The actual real wage is equal to the expected real wage. 
D) The relationship between the actual real wage and the expected real wage cannot be predicted.

Question 6

Shondra's real wage in 2016 is $18.50.If the price level is 106,what is Shondra's nominal wage?

Accepted Answer

A) $19.61 
B) $18.61 
C) $18.50 
D) $17.44 
A) $19.61 
B) $18.61 
C) $18.50 
D) $17.44

Question 7

The "rational expectations" school of economists,including Robert Lucas and Thomas Sargent,argue that changes in monetary policy cannot affect unemployment rates in the short run or long run.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) less likely to reduce the natural unemployment rate. 
B) more likely to reduce inflation. 
C) more likely to affect the unemployment rate. 
D) more likely to result in a vertical short-run Phillips curve. 
A) less likely to reduce the natural unemployment rate. 
B) more likely to reduce inflation. 
C) more likely to affect the unemployment rate. 
D) more likely to result in a vertical short-run Phillips curve.

Question 9

Assume weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls.This explains the ________ slope of the short-run Phillips curve.

Accepted Answer

A) positive 
B) negative 
C) zero 
D) infinite 
A) positive 
B) negative 
C) zero 
D) infinite

Question 10

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called

Accepted Answer

A) the monetary policy curve. 
B) the Phillips curve. 
C) the Sargent curve. 
D) the unemployment curve. 
A) the monetary policy curve. 
B) the Phillips curve. 
C) the Sargent curve. 
D) the unemployment curve.

Question 11

If strong aggregate demand is pushing the economy beyond potential real GDP,which of the following must be true?

Accepted Answer

A) The economy is at an equilibrium that is on the long-run aggregate supply curve. 
B) The economy is at an equilibrium that is on the long-run Phillips curve. 
C) The economy is at an equilibrium that is not on the long-run Phillips curve. 
D) Expansionary monetary policies will push the economy back to the long-run Phillips curve. 
A) The economy is at an equilibrium that is on the long-run aggregate supply curve. 
B) The economy is at an equilibrium that is on the long-run Phillips curve. 
C) The economy is at an equilibrium that is not on the long-run Phillips curve. 
D) Expansionary monetary policies will push the economy back to the long-run Phillips curve.

Question 12

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 expectations of inflation are not altered by the Fed's announcement,the rate of unemployment will be ________ in the short run.

Accepted Answer

A) less than 5.5 percent 
B) 5.5 percent 
C) between 5.5 and 7.5 percent 
D) 7.5 percent 
A) less than 5.5 percent 
B) 5.5 percent 
C) between 5.5 and 7.5 percent 
D) 7.5 percent

Question 13

During the 1960s,when confronted with moderate and stable inflation,people tended to form adaptive expectations of future inflation rates.

Accepted Answer

A) True 
 B)False

Question 14

Even if expectations of inflation are rational,sluggish adjustment of wages and prices will still create a short-run trade-off between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 15

When confronted with rational expectations regarding changes in monetary policy,the short-run Phillips curve may be vertical.

Accepted Answer

A) True 
 B)False

Question 16

According to the "rational expectations" school of thought in macroeconomics,the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.

Accepted Answer

A) negatively sloped 
B) positively sloped 
C) vertical 
D) horizontal 
A) negatively sloped 
B) positively sloped 
C) vertical 
D) horizontal

Question 17

Which of the following is an appropriate policy for a central bank to follow if the economy is plagued with deflation?

Accepted Answer

A) increasing the target interest rate on overnight loans 
B) using contractionary monetary policy to drive up interest rates 
C) consistently pursuing policy to promote the credibility of the central bank 
D) gradually raising the required reserve rate 
A) increasing the target interest rate on overnight loans 
B) using contractionary monetary policy to drive up interest rates 
C) consistently pursuing policy to promote the credibility of the central bank 
D) gradually raising the required reserve rate

Question 18

If the Federal Reserve wants to reduce inflation from 4 percent to 3 percent permanently,how can that goal be achieved,and what impact will that have on employment in the short run and the long run? Support your answer with a graph of the Phillips curve in the short run and the long run.

Accepted Answer

If the Fed wants to reduce inflation,it

Question 19

When inflation is very low,how do workers and firms adjust their expectations of inflation?

Accepted Answer

A) They rapidly adjust their expectations of inflation upward. 
B) They rapidly adjust their expectations of inflation downward. 
C) They tend to ignore inflation. 
D) They are more aggressive in asking for wage and price increases. 
A) They rapidly adjust their expectations of inflation upward. 
B) They rapidly adjust their expectations of inflation downward. 
C) They tend to ignore inflation. 
D) They are more aggressive in asking for wage and price increases.

Question 20

Which of the following best explains the negative slope of the short-run Phillips curve?

Accepted Answer

A) Weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls. 
B) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. 
C) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. 
D) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change. 
A) Weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls. 
B) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. 
C) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. 
D) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change.

Exam 28: Inflation, unemployment, and Federal Reserve Policy

In conducting monetary policy,how has the Federal Reserve enhanced its credibility?

If actual inflation is less than expected inflation,actual real wages will be ________ expected real wages and unemployment will ________.

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

Shondra's real wage in 2016 is $18.50.If the price level is 106,what is Shondra's nominal wage?

The "rational expectations" school of economists,including Robert Lucas and Thomas Sargent,argue that changes in monetary policy cannot affect unemployment rates in the short run or long run.

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

Assume weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls.This explains the ________ slope of the short-run Phillips curve.

The curve showing the short-run relationship between the unemployment rate and the inflation rate is called

If strong aggregate demand is pushing the economy beyond potential real GDP,which of the following must be true?

During the 1960s,when confronted with moderate and stable inflation,people tended to form adaptive expectations of future inflation rates.

Even if expectations of inflation are rational,sluggish adjustment of wages and prices will still create a short-run trade-off between inflation and unemployment.

When confronted with rational expectations regarding changes in monetary policy,the short-run Phillips curve may be vertical.

According to the "rational expectations" school of thought in macroeconomics,the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.

Which of the following is an appropriate policy for a central bank to follow if the economy is plagued with deflation?

If the Federal Reserve wants to reduce inflation from 4 percent to 3 percent permanently,how can that goal be achieved,and what impact will that have on employment in the short run and the long run? Support your answer with a graph of the Phillips curve in the short run and the long run.

When inflation is very low,how do workers and firms adjust their expectations of inflation?

Which of the following best explains the negative slope of the short-run Phillips curve?

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

If actual inflation is less than expected inflation,actual real wages will be expected real wages and unemployment will .