Exam 28: Inflation, unemployment, and Federal Reserve Policy

In an effort to discover whether or not workers understand inflation,economist Robert Shiller conducted a survey.When asked about the effect of general inflation on their wages or salary,the most popular response coming from workers was

According to economists Robert Lucas and Thomas Sargent,the apparent short-run trade-off between unemployment and inflation in the 1950s and 1960s was the result of

Figure 28-1 -Refer to Figure 28-1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point B,which of the following must be true?

Two actions by the Fed during Alan Greenspan's term as chairman have been identified as possibly contributing to the financial crisis in 2008.Which of the following was one of those actions?

What is the relationship between the short-run Phillips curve and the long-run Phillips curve?

According to real business cycle models

If the economy experiences a negative supply shock,which of the following will be true?

In the long run,the Fed may decrease the unemployment rate only if it is willing to increase the rate of inflation.

Models that focus on factors such as technology shocks rather than "monetary" explanations of fluctuations in real GDP are called

An increase in expected inflation will shift the short-run Phillips Curve.

According to the short-run Phillips curve,if unemployment is 2.4% and inflation is 3.7%,a decrease in the inflation rate might result in which of the following?

A relationship that depends on the basic behavior of consumers and firms and remains unchanged over long periods is called a ________ relationship.

If firms and workers have adaptive expectations,what impact will expansionary monetary policy have on inflation,unemployment,and the Phillips curve?

If expectations are adaptive,how will the economy adjust to a new long-run equilibrium in response to expansionary monetary policy? Support your answer with a graph of the Phillips curve.

An increase in the level of structural unemployment will shift the long-run Phillips curve.

If actual inflation is greater than expected inflation

If expectations are adaptive,how will the economy adjust to a new long-run equilibrium in response to contractionary monetary policy? Support your answer with a graph of the Phillips curve.

In which of the following situations might you expect expansionary monetary policy to reduce the unemployment rate?

The policy which holds that the federal government should not allow large financial firms to fail,for fear of damaging the financial system,is known as the ________ policy.

Figure 28-2 -Refer to Figure 28-2.Suppose the Fed used contractionary policy to push short-run equilibrium to point C.If the short-run equilibrium remained at point C long enough