Exam 30: Inflation Expectations and Stabilization Policies

Nominal GDP targeting is a monetary policy that:

How does the Lucas critique relate to analysis using the simple Phillips curve? The Lucas critique:

Policymakers want to collect 10% more in sales tax revenue next year, and so they raise the sales tax rate by 10% from 5% to 5.5%. Which of the following assessments would be consistent with adaptive expectations? Next year sales tax revenue will:

When central bank policies are credible, then unexpected inflation tends to be:

When the central bank has credible policy, the economy is likely to be:

In recent years, economists are increasingly favoring _____ as the preferred indicator of whether aggregate demand is too high or too low.

Why do some economists prefer nominal GDP targeting rather than inflation targeting for monetary policy?

(Figure: Demand Shock I) The movement shown in the figure will only reduce the unemployment rate if:

The simple Phillips curve relationship requires a stable:

During a recession, an economy typically would be operating in what portion of its simple Phillips curve?

If people form expectations in accordance with the rational expectations hypothesis and they correctly anticipate policy actions, then the policies will:

The slope of the short-run simple Phillips curve is:

Provide an example of expectations that are formed adaptively and an example of expectations that are formed rationally.

How well does the simple Phillips curve relate to the aggregate supply and aggregate demand model?

(Figure: Expectations A) In the figure, what is the cause of the movement from point a to b?

(Figure: Expectations A) In the figure, what is the cause of the movement from point b to c?

According to the simple Phillips curve, in the short run, if unemployment decreases, then:

The simple Phillips curve is consistent with the changes in equilibrium in the aggregate supply and aggregate demand model that occur when the _____ curve shifts.

(Figure: Expectations 0) In the figure, what is the cause of the movement from point a to b?

When an economy is in recession, the unexpected inflation rate will be: