Exam 17: Inflation,unemployment,and Federal Reserve Policy

Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations.

Goodyear benefitted when the Federal Reserve slashed the federal funds rate to near-zero levels in 2008.Lower interest rates increased demand for its tires,which would allow Goodyear to ________ employment and ________ prices.

In order to change inflationary expectations in 1979,the Fed's monetary policy under Paul Volcker's leadership resulted in ________ and ________.

The natural rate of unemployment equals

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

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?

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

In August 1979,President Jimmy Carter appointed ________ as chairman of the Board of Governors of the Federal Reserve System.

Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by

One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates,leading to speculative bubbles in stocks or other financial assets as investors

At the point where actual inflation is equal to expected inflation,

If changes in inflation are higher than expected,

In the 1960s,many economists and policymakers believed the trade-off between inflation and unemployment was permanent.

Workers at a local construction company are paid $32.50 per hour,and they have incorporated a 4 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 2 percent will affect the real wages earned by these workers and the unemployment rate of these workers.

If actual inflation is greater than expected inflation,

The long-run Phillips curve is ________ than the short-run Phillips curve.

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

Which of the following would increase the natural rate of unemployment?

A decrease in aggregate demand will

Figure 17-4 -Refer to Figure 17-4.Consider the shift in the short-run Phillips curves shown in the above graph.This shift may be explained by