Exam 30: Inflation Expectations and Stabilization Policies

The view that people use all available information, including their past experiences, in forming their expectations and that these expectations impact their behavior is known as the _____ view.

If nominal GDP is higher than expected, then unemployment is:

Manu has received a 2% raise each year for the past 10 years. The company where he works has just experienced its most profitable year during that time, and Manu has had his most productive year yet and was the most productive worker in his section. Which of the following expectations of next year's salary would be consistent with Manu basing his expectations on rational expectations?

Evidence over time indicates that the relationship depicted in the simple Phillips curve holds true only if policymakers:

Jonah earned a C in ECON 101, and so he expects to earn a C in ECON 102. Jonah's prediction is consistent with _____ expectations.

In the short run, there _____ a trade-off between inflation and unemployment, and in the long run, there _____ a trade-off between inflation and unemployment.

The graph below shows an expectations-augmented Phillips curve. If inflation is higher than expected, then unemployment is below the natural rate. If inflation is lower than expected, then unemployment is higher than the natural rate. For example, if inflation is expected to be 5% but actual inflation is 2%, then:

Jane assumes that tomorrow's weather will be like today's weather. Jane's expectation of the weather is consistent with _____ expectations.

The simple Phillips curve relies on the assumption that the business cycle is caused by _____ shocks:

Nominal GDP targeting is a policy approach in which the Federal Reserve:

Which of the following situations would NOT be consistent with the relationship in the simple Phillips curve?

A credible policy is defined as a policy that:

What movement would occur on an economy's simple Phillips curve when the economy's aggregate demand curve shifts to the left? There would be a movement to a _____ point on the curve with:

(Figure: Expectations 0) In the figure, what is the inflation rate at point c?

When will the economy be at a point on the expectations-augmented Phillips curve that has an unemployment rate below the natural rate?

Summarize three flaws in the simple Phillips curve model.

The simple Phillips curve model continues to perform well in many countries where three conditions are present. Which of the following is NOT one of the three conditions?

What happens on the expectations-augmented Phillips curve graph when higher inflation is expected?

The theory that when inflation expectations adjust to actual inflation, the rate of unemployment returns to the natural rate is known as the:

Which of the following has little impact on nominal GDP?