Exam 15: Stabilization Policy, Output, and Employment

(I) In the 1960s and 1970s, most economists believed that there was a permanent trade-off between inflation and unemployment. (II) Today, most economists believe there is no permanent trade-off between inflation and unemployment.

If decision makers adjust fully to demand stimulus policies, persistent expansionary macro-policy will lead to

During the recession of 2008-2009, the length of time qualified workers were permitted to draw unemployment benefits was increased from 26 to up to 99 weeks. Economic theory indicates that this extension would

Regarding the issue of economic stability, nonactivists believe that

Which of the following is true regarding economic fluctuations in the United States?

Use the figure below to answer the following question(s). Figure 15-1 -In Figure 15-1, AD₁ and SRAS₁ indicate initial conditions in the goods and services market. In the short run, which of the following will most likely result from a shift to a more expansionary monetary policy under the rational expectations hypothesis?

Why did many economists during the 1960s and 1970s believe that expansionary macroeconomic policy that resulted in inflation would reduce the rate of unemployment?

According to the theory of rational expectations, the government can influence output

According to the rational expectations theory, which of the following will affect the levels of output and employment?

The index of leading indicators is

Systematic overestimation or underestimation of inflation will

Which combination of signals would be a strong indication that Fed policy is too expansionary and that a shift to a more restrictive policy is in order?

According to the rational expectations theory,

After an extended period of steady inflation at a constant rate,

(I) Rational expectations adherents believe that decision makers base their future expectations on actual outcomes observed during recent periods. (II) The adaptive expectations hypothesis states that decision makers weigh all available evidence when forming expectations about future economic events.

Figure 15-3 -As shown in Figure 15-3, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD₁ to AD₂ will cause the price level to move

Which of the following is a major area of disagreement between activists and nonactivists?

The index of leading indicators was developed to provide more reliable information on

What are the proper monetary and fiscal responses to a recession under the activist view and the nonactivist view?

Which of the following contributed the most to the economic stability and strong growth of real GDP during the 1980s and 1990s?