Exam 17: Inflation,unemployment,and Federal Reserve Policy

If the economy experiences a(n)________,inflation will rise and real GDP will fall.

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

Why is the credibility of the Fed's policy announcements particularly important?

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?

Employees at the university have negotiated a 5 percent increase in wages for the next year,based on their inflation expectations.If inflation is actually 4 percent over the next year,which of the following will occur?

During which of the following time periods did inflation remain above 5 percent every year?

If firms and workers have rational expectations,including knowledge of the policy being used by the Federal Reserve,the short-run Phillips curve will be

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

When individuals use all available information about an economic variable to make a decision,expectations are

If the Federal Reserve announces that its target for the federal funds rate is rising from 4 percent to 4.25 percent,how do you expect workers and firms to react?

Evidence shows that for many people,delaying searching for a job for a year or longer after they are laid off will contribute to a deterioration of their job skills,making it harder for them to find employment.This deterioration in job skills and the subsequent retraining that is necessary to obtain employment relates to which type of unemployment?

If workers and firms have rational expectations,they understand that ________ monetary policy will raise the inflation rate,so actual inflation ________ expected inflation.

Figure 17-1 -Refer to Figure 17-1.What should the Federal Reserve do if it wants to move from point A to point B in the short-run Phillips curve depicted in the figure above?

If the economy is producing at potential GDP,

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

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?

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

Why do most economists believe that it is important for a country's central bank to be independent of the rest of the country's central government?

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

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.