Exam 27: The Phillips Curve and Expectations Theory
Exam 1: Introducing the Economic Way of Thinking85 Questions
Exam 2: Production Possibilities Opportunity Cost and Economic Growth107 Questions
Exam 3: Market Demand and Supply176 Questions
Exam 4: Markets in Action137 Questions
Exam 5: Price Elasticity of Demand and Supply151 Questions
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Exam 15: Gross Domestic Product109 Questions
Exam 16: Business Cycles and Unemployment94 Questions
Exam 17: Inflation56 Questions
Exam 18: The Keynesian Model111 Questions
Exam 19: The Keynesian Model in Action105 Questions
Exam 20: Aggregate Demand and Supply94 Questions
Exam 21: Fiscal Policy108 Questions
Exam 22: The Public Sector55 Questions
Exam 23: Federal Deficits Surpluses and the National Debt42 Questions
Exam 24: Money and the Federal Reserve System75 Questions
Exam 25: Money Creation117 Questions
Exam 26: Monetary Policy106 Questions
Exam 27: The Phillips Curve and Expectations Theory59 Questions
Exam 28: International Trade and Finance127 Questions
Exam 29: Economies in Transition46 Questions
Exam 30: Growth and the Less Developed Countries55 Questions
Exam 31: Understanding Direct and Inverse Relationships between Variables172 Questions
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Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?
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Correct Answer:
A
Exhibit 17-3 Aggregate demand and aggregate supply curves
As shown in Exhibit 17-3, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause the economy to move:

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Correct Answer:
D
Exhibit 17-1 Inflation and unemployment rates
In Exhibit 17-1, when the unemployment rate goes from 9 percent to 1.5 percent, the:

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Correct Answer:
B
Which of the following models emphasizes the importance of credible, predictable government policies for maintaining full employment with low inflation?
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According to rational expectations theory, which of the following is the best approach to lower the inflation rate?
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Exhibit 17-4 Short-run and long-run Phillips curves
Suppose the economy in Exhibit 17-4 is at point E1, and the Fed increases the money supply. If people have rational expectations, then the economy will move:

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Under adaptive expectations theory, an increase in the short-run aggregate demand curve ____ the inflation rate and ____ the unemployment rate.
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According to adaptive expectations theory, which of the following would be the result of expansionary monetary and fiscal policies?
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Exhibit 17-2 Aggregate demand and aggregate supply curves
As shown in Exhibit 17-2, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause the economy to move:

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The rational expectations theory indicates that expansionary policy will:
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The political business cycle refers to the possibility that:
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Exhibit 17-3 Aggregate demand and aggregate supply curves
As shown in Exhibit 17-3, 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:

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If the long-run Phillips curve is vertical, then any government policy designed to lower:
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Exhibit 17-2 Aggregate demand and aggregate supply curves
As shown in Exhibit 17-2, if people behave according to rational expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause the price level to move:

(Multiple Choice)
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Starting from an initial long-run equilibrium, under the rational expectations hypothesis, an anticipated shift to a more expansionary policy will increase:
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Experience with the Phillips curve since the 1970s has shown that the:
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Which of the following best describes the idea of a political business cycle?
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Explain why rational expectations theorists do not support government intervention to alleviate unemployment. Explain their views on the effectiveness of fiscal policy and monetary policy.
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