Exam 16: Inflation and Monetary Policy

-Refer to Figure 16-1.Suppose a demand shock causes output to rise above full employment and increases money demand from $\mathrm { M } _ { 1 } ^ { \mathrm { D } }$ to $\mathrm { M } _ { 2 } ^ { \mathrm { D } }$ .If the Fed wants to maintain the interest rate at r?,it will

In the long run,there is a no tradeoff between inflation and unemployment.

In the long run,there is a tradeoff between inflation and unemployment.

If the Fed wants to move the economy down and to the right along the Phillips curve,what must it do?

The Fed generally intervenes very actively in specific asset markets in all kinds of circumstances.

Which of the following is true?

When the economy was at full employment in the late 1990s,the price level was continually rising.This meant

The Fed can surely reduce the rightward shift of the AD curve,but

Negative supply shocks confront the Fed with a dilemma because

What would happen if employment is continually above or below its full-employment level?

When the Federal Reserve System was first established,which of the following was its chief responsibility?

A fluctuating rate of inflation

In the 1960s,the U.S.experienced ongoing inflation.What was the main cause of this inflation?

One reason the Fed tolerates ongoing inflation is because it

Since World War II,the U.S.economy has been characterized by

A zero inflation rate is not the Fed's objective because

What is a good historical example of when the Fed created a recession to reduce inflation expectations?

The vertical long-run Phillips curve

If the Fed increases the money supply in response to positive demand shocks,it

Moving up the Phillips curve in the short run will cause the entire curve to shift upward in the long run.