Exam 16: Stabilization in an Integrated World Economy

Which of the following can help explain why prices might be "sticky"?

New Keynesian economists generally argue that

In new Keynesian theory, the pattern of inflation exhibited by an economy with growing aggregate demand known as inflation dynamics is

According to Friedman and Phelps, which of the following statements is a correct characterization of unemployment and inflation in the United States since the 1950s?

-Refer to the above figure. Unexpected expansionary monetary policy has caused the aggregate demand curve to shift to AD₂. In the long run

Frictional and structural unemployment both exist when

What did Milton Friedman and E.S. Phelps argue with respect to the Phillips Curve?

Small menu costs are a common reason offered for the existence of

When policy makers take actions in response to or in anticipation of some change in the overall economy, there is

Assume that the government decides to use fiscal or monetary policy to stimulate the economy and that this action comes as a surprise to most individuals and businesses. In the short run, the result will be

Examination of data since 1953 indicates that during this period stretching more than half a century, the Phillips curve

Which statement is TRUE when rational expectations exist and there is a change in monetary policy which is unexpected?

A hypothesis that assumes that people combine the effects of past policy changes on economic events and their own judgment about future effects of current and future policy changes is known as

A trade-off between unemployment and inflation is reflected in the

According to the new Keynesian sticky-price theory, a rise in aggregate demand results in ________ price level in the near term and in ________ price level in the longer term.

-Refer to the above figure. Suppose the natural rate of unemployment is 5 percent. If the government tried to reduce unemployment to 4 percent and keep it there, it must

-Refer to the above figure. Suppose the economy is in equilibrium at point A. If the Fed tries to stimulate the economy by undertaking an expansionary monetary policy action and this is not expected by the people in the economy, we would expect to see

-Use the above figure. Assuming that policy actions are unanticipated, if the economy is at point A and the policy makers want to get to point B, they could

-In the above figure, starting at E₃, if there is an increase in technology that causes a temporary increase in production capabilities

Suppose the Fed permanently increases the money supply by a given amount. Which of the following is (are)most likely to occur in the long run as a result of this monetary policy action?