Exam 14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

The observed unemployment rate is less than the natural rate of unemployment if:

The hypothesis of political business cycles is based on the assumption that a vertical Phillips curve always holds.

According to the theory of adaptive expectations, if the inflation rate has been 4.2 percent for the last ten years, people will expect next year's inflation rate to be:

The Phillips curve based on the unemployment and inflation rates in the U.S. between 1961 and 1969 was:

If the Fed aims to achieve a level of unemployment below its natural rate, it must follow time-inconsistent policies.

Figure 14.4 -Refer to Figure 14.4. A movement from point A to point C would be associated with an:

One of the most important factors in determining the natural rate of unemployment is demographic change, such as a change in the age of the labor force.

Suppose that the economy has witnessed an 8 percent increase in its money supply over the last few years and the Fed now announces a plan to increase the money supply by 4 percent per year. What will be the public response, assuming that the Fed has a reputation for always implementing its announced plans?

If the government fiscal deficit equals $240 million and government borrowing equals $120 million, what is the change in the money supply in the economy?

When the reservation wage is adjusted to account for a higher inflation rate:

Which of the following was sanctioned by the Zimbabwe government in January 2009 as a substitute currency?

A decline in aggregate demand is analogous to an upward movement along the short-run Phillips curve.

Hyperinflation in developing countries is typically the result of:

The slope of the short-run Phillips curve is consistent with:

According to the theory of rational expectations, the economy always remains at the natural rate of unemployment, irrespective of policy changes.

If an increase in inflation is expected, which of the following events is the least likely to occur?

In order to achieve an unemployment rate below the natural rate of unemployment, the Fed must pursue a policy of low monetary growth during a time when the public expects high inflation.

The figure given below depicts the long run equilibrium in an economy.?Figure 14.1??In the figure:?AD₁ and AD₂: Aggregate demand curves?AS₁ and AS₂: Aggregate supply curves -Refer to Figure 14.1. The movement from point A to point B to point C results in:

The adaptive expectations theory suggests that:

The Phillips curve describes a negative relationship between unemployment and inflation.