Exam 16: Macro Policy Debate: Active or Passive?

-Refer to Exhibit 16.6, which reflects the relationship between the inflation rate and the unemployment rate. The figure shows that the natural rate of unemployment is _____

Policy makers may not know that the economy is in a recession until six months after the recession starts; this phenomenon is known as the _____

If the price level increases more rapidly than expected, _____

Once a new rule is adopted by the Fed, _____

The short-run Phillips curve is based upon labor contracts that reflect a given expected _____

According to the passive approach, discretionary fiscal or monetary policy can reduce the costs of an unstable economy.

-Refer to Exhibit 16.7, which reflects the relationship between real GDP and the price level. If the economy is initially at point c and aggregate demand is stable, in the long run, the economy will _____

_____ won the 1995 Nobel Prize in Economics for his studies of rational expectations.

The short-run Phillips curve is drawn for a given expected inflation rate, and so it shifts as inflation expectations change.

The wage rate considered acceptable to workers engaged in collective bargaining will be determined in part by what monetary policy workers expect in the near future.

In general, the Fed has not embraced a fixed-growth-rate monetary policy because _____

Exhibit 16.3 -Refer to Exhibit 16.3. At point a, workers and firms expect a price level of _____

In the early 1960s, the discovery of the Phillips curve relationship caused economists and policy makers to think that they understood the trade-offs between _____

Suppose an economy had been operating along a given short-run Phillips curve for several years and then experienced a year of stagflation. The year of stagflation would _____

Advocates of the active approach believe that discretionary government policy can restore economic stability and improve economic performance.

Some economists believe that in the long run, the unemployment rate is independent of the inflation rate and so the Phillips curve becomes a vertical line.

Which of the following is true of rational expectations?

Brandon, an economist, is a believer of the rational expectations school. According to him, which of the following is likely to affect the levels of output and employment in an economy?

Which of the following is correct?

Inflation target refers to the commitment of central bankers to keep inflation below a certain rate for the next year or two.