Question 1

When a central bank works makes joint decisions with the government's Treasury department,

Accepted Answer

A)  the central bank risks losing credibility. 
B)  the central bank is asserting its independence. 
C)  the government enhances its credibility. 
D)  the government loses its ability to conduct fiscal policy. 
A)  the central bank risks losing credibility. 
B)  the central bank is asserting its independence. 
C)  the government enhances its credibility. 
D)  the government loses its ability to conduct fiscal policy. A

Question 2

An increase in frictional unemployment will

Accepted Answer

A)  shift the long-run Phillips curve to the right. 
B)  increase the natural rate of unemployment. 
C)  shift the short-run Phillips curve to the right. 
D)  All of the above are correct. 
E)  None of the above are correct. 
A)  shift the long-run Phillips curve to the right. 
B)  increase the natural rate of unemployment. 
C)  shift the short-run Phillips curve to the right. 
D)  All of the above are correct. 
E)  None of the above are correct. D

Question 3

Between July 2008 and July 2009,the Phillips curve relationship appeared to fit the data well,as the unemployment rate ________ and the inflation rate ________.

Accepted Answer

A)  rose from 5.8 percent to 9.5 percent; rose from -2.10 percent to 5.6 percent 
B)  rose from 5.8 percent to 9.5 percent; fell from 5.6 percent to -2.10 percent 
C)  fell from 9.5 percent to 5.8 percent; fell from 5.6 percent to -2.10 percent 
D)  fell from 9.5 percent to 5.8 percent; rose from -2.10 percent to 5.6 percent 
A)  rose from 5.8 percent to 9.5 percent; rose from -2.10 percent to 5.6 percent 
B)  rose from 5.8 percent to 9.5 percent; fell from 5.6 percent to -2.10 percent 
C)  fell from 9.5 percent to 5.8 percent; fell from 5.6 percent to -2.10 percent 
D)  fell from 9.5 percent to 5.8 percent; rose from -2.10 percent to 5.6 percent B

Question 4

Figure 28-5
  
-Refer to Figure 28-5.Consider the Phillips curves depicted in the graph above.The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year,and it succeeds. If the assumptions of the rational expectations school hold true,and the Fed's announcement is credible,the rate of unemployment will be ________ in the short run.

Accepted Answer

A)  less than 5.5 percent 
B)  5.5 percent 
C)  between 5.5 and 7.5 percent 
D)  7.5 percent 
A)  less than 5.5 percent 
B)  5.5 percent 
C)  between 5.5 and 7.5 percent 
D)  7.5 percent

Question 5

Evidence shows that for many people,delaying searching for a job for a year or longer after they are laid off will contribute to a deterioration of their job skills,making it harder for them to find employment.This deterioration in job skills and the subsequent retraining that is necessary to obtain employment relates to which type of unemployment?

Accepted Answer

A)  cyclical 
B)  frictional 
C)  seasonal 
D)  structural 
A)  cyclical 
B)  frictional 
C)  seasonal 
D)  structural

Question 6

In face of rational expectations regarding changes in monetary policy,the short-run Phillips Curve may be vertical.

Accepted Answer

A) True 
 B)False

Question 7

The expansionary monetary and fiscal policies of the 1960s resulted in ________ inflation rates and ________ rates of unemployment.

Accepted Answer

A)  high; high 
B)  low; low 
C)  low; high 
D)  high; low 
A)  high; high 
B)  low; low 
C)  low; high 
D)  high; low

Question 8

If firms and workers have adaptive expectations,what impact will contractionary monetary policy have on inflation,unemployment,and the Phillips curve?

Accepted Answer

Adaptive expectations exist when firms a

Question 9

Figure 28-1
  
-Refer to Figure 28-1. Suppose that the economy is currently at point A. If the Federal Reserve engaged in expansionary monetary policy,where would the economy end up in the short run?

Accepted Answer

A)  It would remain at point A. 
B)  point B 
C)  point C 
D)  point D 
E)  point E 
A)  It would remain at point A. 
B)  point B 
C)  point C 
D)  point D 
E)  point E

Question 10

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

Accepted Answer

A)  The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B)  The Fed could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy. 
C)  The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D)  The Fed has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal. 
A)  The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent. 
B)  The Fed could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy. 
C)  The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently. 
D)  The Fed has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal.

Question 11

If actual inflation is less than expected inflation,what is the relationship between the actual real wage and the expected real wage?

Accepted Answer

A)  The actual real wage is lower than the expected real wage. 
B)  The actual real wage is higher than the expected real wage. 
C)  The actual real wage is equal to the expected real wage. 
D)  The relationship between the actual real wage and the expected real wage cannot be predicted. 
A)  The actual real wage is lower than the expected real wage. 
B)  The actual real wage is higher than the expected real wage. 
C)  The actual real wage is equal to the expected real wage. 
D)  The relationship between the actual real wage and the expected real wage cannot be predicted.

Question 12

Real business cycle models argue that fluctuations in real GDP are caused by unanticipated changes in the money supply.

Accepted Answer

A) True 
 B)False

Question 13

Figure 28-4
  
-The short-run Phillips curve will not shift unless there is

Accepted Answer

A)  an increase in the unemployment rate. 
B)  an increase in inflation that is unanticipated. 
C)  a decrease in inflation that is unanticipated. 
D)  a change in inflation expectations. 
A)  an increase in the unemployment rate. 
B)  an increase in inflation that is unanticipated. 
C)  a decrease in inflation that is unanticipated. 
D)  a change in inflation expectations.

Question 14

Figure 28-1
  
-Refer to Figure 28-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point B,which of the following must be true?

Accepted Answer

A)  The economy is producing a level of GDP equal to potential GDP. 
B)  Aggregate demand must have increased. 
C)  Equilibrium GDP at point B must be below potential GDP. 
D)  The Fed conducted expansionary policy to cause the move. 
E)  The Fed purchased treasury bills to cause the move. 
A)  The economy is producing a level of GDP equal to potential GDP. 
B)  Aggregate demand must have increased. 
C)  Equilibrium GDP at point B must be below potential GDP. 
D)  The Fed conducted expansionary policy to cause the move. 
E)  The Fed purchased treasury bills to cause the move.

Question 15

If rational workers and firms know that the Federal Reserve is following a contractionary monetary policy,they will expect inflation to ________ and will adjust wages so that the real wage ________.

Accepted Answer

A)  increase; remains unchanged 
B)  decrease; remains unchanged 
C)  decrease; increases 
D)  increase; decreases 
A)  increase; remains unchanged 
B)  decrease; remains unchanged 
C)  decrease; increases 
D)  increase; decreases

Question 16

Which of the following could decrease unemployment and inflation simultaneously?

Accepted Answer

A)  an decrease in oil prices 
B)  expansionary monetary policy 
C)  contractionary monetary policy 
D)  an increase in the real wage 
A)  an decrease in oil prices 
B)  expansionary monetary policy 
C)  contractionary monetary policy 
D)  an increase in the real wage

Question 17

Why is the credibility of the Fed's policy announcements particularly important?

Accepted Answer

The credibility of policy announcements

Question 18

Figure 28-1
  
-According to the short-run Phillips curve,which of the following would result in high rates of unemployment?

Accepted Answer

A)  strong increases in aggregate supply 
B)  a lower inflation rate 
C)  strong increases in aggregate demand 
D)  a higher inflation rate 
A)  strong increases in aggregate supply 
B)  a lower inflation rate 
C)  strong increases in aggregate demand 
D)  a higher inflation rate

Question 19

Ceteris paribus,an increase in the current or actual rate of inflation will cause

Accepted Answer

A)  the short run Phillips curve to shift upward. 
B)  the unemployment rate to decrease (a movement along the short run Phillips curve). 
C)  the long run Phillips curve to shift leftward. 
D)  expectations of future inflation rates to be revised downward. 
A)  the short run Phillips curve to shift upward. 
B)  the unemployment rate to decrease (a movement along the short run Phillips curve). 
C)  the long run Phillips curve to shift leftward. 
D)  expectations of future inflation rates to be revised downward.

Question 20

Figure 28-6
  
-Refer to Figure 28-6.A typical long-run Phillips curve would have the appearance of a curve running through points

Accepted Answer

A)  A and B. 
B)  A and C. 
C)  B and C. 
D)  A, B and C. 
A)  A and B. 
B)  A and C. 
C)  B and C. 
D)  A, B and C.

When a central bank works makes joint decisions with the government's Treasury department,

An increase in frictional unemployment will

Between July 2008 and July 2009,the Phillips curve relationship appeared to fit the data well,as the unemployment rate and the inflation rate .

In face of rational expectations regarding changes in monetary policy,the short-run Phillips Curve may be vertical.

The expansionary monetary and fiscal policies of the 1960s resulted in inflation rates and rates of unemployment.

If firms and workers have adaptive expectations,what impact will contractionary monetary policy have on inflation,unemployment,and the Phillips curve?

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A. If the Federal Reserve engaged in expansionary monetary policy,where would the economy end up in the short run?

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

If actual inflation is less than expected inflation,what is the relationship between the actual real wage and the expected real wage?

Real business cycle models argue that fluctuations in real GDP are caused by unanticipated changes in the money supply.

Figure 28-4 -The short-run Phillips curve will not shift unless there is

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point B,which of the following must be true?

If rational workers and firms know that the Federal Reserve is following a contractionary monetary policy,they will expect inflation to and will adjust wages so that the real wage .

Which of the following could decrease unemployment and inflation simultaneously?

Why is the credibility of the Fed's policy announcements particularly important?

Figure 28-1 -According to the short-run Phillips curve,which of the following would result in high rates of unemployment?

Ceteris paribus,an increase in the current or actual rate of inflation will cause

Figure 28-6 -Refer to Figure 28-6.A typical long-run Phillips curve would have the appearance of a curve running through points

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 17: Inflation, unemployment, and Federal Reserve Policy

When a central bank works makes joint decisions with the government's Treasury department,

An increase in frictional unemployment will

Between July 2008 and July 2009,the Phillips curve relationship appeared to fit the data well,as the unemployment rate ________ and the inflation rate ________.

In face of rational expectations regarding changes in monetary policy,the short-run Phillips Curve may be vertical.

The expansionary monetary and fiscal policies of the 1960s resulted in ________ inflation rates and ________ rates of unemployment.

If firms and workers have adaptive expectations,what impact will contractionary monetary policy have on inflation,unemployment,and the Phillips curve?

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A. If the Federal Reserve engaged in expansionary monetary policy,where would the economy end up in the short run?

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

If actual inflation is less than expected inflation,what is the relationship between the actual real wage and the expected real wage?

Real business cycle models argue that fluctuations in real GDP are caused by unanticipated changes in the money supply.

Figure 28-4 -The short-run Phillips curve will not shift unless there is

Figure 28-1 -Refer to Figure 28-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point B,which of the following must be true?

If rational workers and firms know that the Federal Reserve is following a contractionary monetary policy,they will expect inflation to ________ and will adjust wages so that the real wage ________.

Which of the following could decrease unemployment and inflation simultaneously?

Why is the credibility of the Fed's policy announcements particularly important?

Figure 28-1 -According to the short-run Phillips curve,which of the following would result in high rates of unemployment?

Ceteris paribus,an increase in the current or actual rate of inflation will cause

Figure 28-6 -Refer to Figure 28-6.A typical long-run Phillips curve would have the appearance of a curve running through points

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Between July 2008 and July 2009,the Phillips curve relationship appeared to fit the data well,as the unemployment rate and the inflation rate .

The expansionary monetary and fiscal policies of the 1960s resulted in inflation rates and rates of unemployment.

If rational workers and firms know that the Federal Reserve is following a contractionary monetary policy,they will expect inflation to and will adjust wages so that the real wage .