Question 1

Matt's real wage in 2018 is $26.80.If the price level is 104,what is Matt's nominal wage?

Accepted Answer

A) $30.80 
B) $27.87 
C) $26.80 
D) $25.77 
A) $30.80 
B) $27.87 
C) $26.80 
D) $25.77 B

Question 2

A higher inflation rate can lead to lower unemployment if ________ mistakenly expect the inflation rate to be lower than it turns out to be.

Accepted Answer

A) workers,but not employers 
B) employers,but not workers 
C) both workers and employers 
D) neither workers nor employers 
A) workers,but not employers 
B) employers,but not workers 
C) both workers and employers 
D) neither workers nor employers C

Question 3

In the dynamic AD-AS model,when will a decrease in aggregate demand not result in a lower inflation rate in the short run?

Accepted Answer

A decrease in aggregate demand will not result in a lower inflation rate in the short run if there is no change in the price level as a result of the decrease in aggregate demand.If,for example,aggregate supply decreases and potential GDP decreases at the same time that aggregate demand is decreasing,the inflation rate may remain unchanged.

Question 4

Figure 17-4  
-Refer to Figure 17-4.Consider the shift in the short-run Phillips curves shown in the above graph.This shift may be explained by

Accepted Answer

A) an increase in the natural rate of unemployment from 5.0 to 6.2 percent. 
B) an increase in the expected rate of inflation from 4.0 to 5.5 percent. 
C) either an increase in the natural rate of unemployment from 5.0 to 6.2 percent or an increase in the expected rate of inflation from 4.0 to 5.5 percent. 
D) None of the above is correct. 
A) an increase in the natural rate of unemployment from 5.0 to 6.2 percent. 
B) an increase in the expected rate of inflation from 4.0 to 5.5 percent. 
C) either an increase in the natural rate of unemployment from 5.0 to 6.2 percent or an increase in the expected rate of inflation from 4.0 to 5.5 percent. 
D) None of the above is correct.

Question 5

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

Accepted Answer

A) The Fed will follow deflationary monetary policies. 
B) The Fed will follow inflationary monetary policies. 
C) The rate of inflation will fall as Fed tries to reduce the unemployment rate. 
D) The Fed will reduce the natural rate of unemployment. 
A) The Fed will follow deflationary monetary policies. 
B) The Fed will follow inflationary monetary policies. 
C) The rate of inflation will fall as Fed tries to reduce the unemployment rate. 
D) The Fed will reduce the natural rate of unemployment.

Question 6

All of the following have enhanced the Fed's credibility in conducting monetary policy except

Accepted Answer

A) following through with changes it has announced. 
B) revealing the Fed's target for the federal funds rate. 
C) making the minutes of the open market committee meetings public. 
D) discontinuing the policy of announcing whether it considered the economy to be at greater risk of inflation or recession following each FOMC meeting. 
A) following through with changes it has announced. 
B) revealing the Fed's target for the federal funds rate. 
C) making the minutes of the open market committee meetings public. 
D) discontinuing the policy of announcing whether it considered the economy to be at greater risk of inflation or recession following each FOMC meeting.

Question 7

Which of the following best describes the negative slope of the short-run Phillips curve?

Accepted Answer

A) Weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls. 
B) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. 
C) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. 
D) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change. 
A) Weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls. 
B) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises. 
C) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls. 
D) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change.

Question 8

The key to understanding the short-run trade-off behind the Phillips curve is that an increase in inflation will decrease unemployment if the inflation is ________ by both workers and firms.

Accepted Answer

A) unexpected 
B) expected 
C) perfectly predicted 
D) ignored 
A) unexpected 
B) expected 
C) perfectly predicted 
D) ignored

Question 9

If expected inflation falls,the long-run Phillips curve will

Accepted Answer

A) shift to the right. 
B) not be affected. 
C) shift to the left. 
D) become negatively sloped. 
A) shift to the right. 
B) not be affected. 
C) shift to the left. 
D) become negatively sloped.

Question 10

Figure 17-2  
-Refer to Figure 17-2.Suppose the economy is at point A.The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?

Accepted Answer

A) Inflation will accelerate in the long run. 
B) Inflationary expectations will decline. 
C) Unemployment will rise above the natural rate. 
D) Unemployment will accelerate in the long run. 
A) Inflation will accelerate in the long run. 
B) Inflationary expectations will decline. 
C) Unemployment will rise above the natural rate. 
D) Unemployment will accelerate in the long run.

Question 11

In the dynamic AD-AS model,when will an increase in aggregate demand not result in lower unemployment rates in the short run?

Accepted Answer

An increase in aggregate demand will not

Question 12

If the economy experiences a(n)________,inflation will rise and real GDP will fall.

Accepted Answer

A) negative supply shock 
B) positive supply shock 
C) increase in short-run aggregate supply 
D) decrease in aggregate demand 
A) negative supply shock 
B) positive supply shock 
C) increase in short-run aggregate supply 
D) decrease in aggregate demand

Question 13

According to the ________ Phillips curve,the unemployment rate and the inflation rate are negatively related.

Accepted Answer

A) long-run 
B) short-run 
C) long-run and short-run 
D) rational expectations 
A) long-run 
B) short-run 
C) long-run and short-run 
D) rational expectations

Question 14

One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates,leading to speculative bubbles in stocks or other financial assets as investors

Accepted Answer

A) chose to sell off these assets due to the low returns on investment. 
B) borrowed at these low interest rates to buy these assets. 
C) delayed purchasing these assets until interest rates rose. 
D) switched from investing in these assets to assets with higher risks. 
A) chose to sell off these assets due to the low returns on investment. 
B) borrowed at these low interest rates to buy these assets. 
C) delayed purchasing these assets until interest rates rose. 
D) switched from investing in these assets to assets with higher risks.

Question 15

A decrease in cyclical unemployment will

Accepted Answer

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

Question 16

Figure 17-1  
-Refer to Figure 17-1.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 17

According to ________,the economy is normally at potential GDP.

Accepted Answer

A) the short-run Phillips curve 
B) the adaptive expectations theory 
C) new Keynesian economists 
D) real business cycle models 
A) the short-run Phillips curve 
B) the adaptive expectations theory 
C) new Keynesian economists 
D) real business cycle models

Question 18

If the Fed chose to change its policy actions implemented during the heart of the recession faster than the timing suggested by the White House,this would be an indication of the Fed's

Accepted Answer

A) lack of credibility. 
B) independence. 
C) changing its monetary policy target. 
D) frictional relationship with the White House. 
A) lack of credibility. 
B) independence. 
C) changing its monetary policy target. 
D) frictional relationship with the White House.

Question 19

Models that focus on factors such as technology shocks rather than "monetary" explanations of fluctuations in real GDP are called

Accepted Answer

A) nonmonetary business cycle models. 
B) real business cycle models. 
C) rational expectations models. 
D) short-run macroeconomic models. 
A) nonmonetary business cycle models. 
B) real business cycle models. 
C) rational expectations models. 
D) short-run macroeconomic models.

Question 20

Workers and firms are currently expecting the price level to increase from 110 to 114.The Federal Reserve then announces that it will be reducing the growth rate of the money supply.If the Fed's announcement is credible,and firms and workers have rational expectations,describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.

Accepted Answer

Workers and firms were expecting an infl

Matt's real wage in 2018 is $26.80.If the price level is 104,what is Matt's nominal wage?

A higher inflation rate can lead to lower unemployment if ________ mistakenly expect the inflation rate to be lower than it turns out to be.

In the dynamic AD-AS model,when will a decrease in aggregate demand not result in a lower inflation rate in the short run?

Figure 17-4 -Refer to Figure 17-4.Consider the shift in the short-run Phillips curves shown in the above graph.This shift may be explained by

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

All of the following have enhanced the Fed's credibility in conducting monetary policy except

Which of the following best describes the negative slope of the short-run Phillips curve?

The key to understanding the short-run trade-off behind the Phillips curve is that an increase in inflation will decrease unemployment if the inflation is ________ by both workers and firms.

If expected inflation falls,the long-run Phillips curve will

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A.The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?

In the dynamic AD-AS model,when will an increase in aggregate demand not result in lower unemployment rates in the short run?

If the economy experiences a(n)________,inflation will rise and real GDP will fall.

According to the ________ Phillips curve,the unemployment rate and the inflation rate are negatively related.

One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates,leading to speculative bubbles in stocks or other financial assets as investors

A decrease in cyclical unemployment will

Figure 17-1 -Refer to Figure 17-1.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?

According to ________,the economy is normally at potential GDP.

If the Fed chose to change its policy actions implemented during the heart of the recession faster than the timing suggested by the White House,this would be an indication of the Fed's

Models that focus on factors such as technology shocks rather than "monetary" explanations of fluctuations in real GDP are called

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

Matt's real wage in 2018 is $26.80.If the price level is 104,what is Matt's nominal wage?

A higher inflation rate can lead to lower unemployment if ________ mistakenly expect the inflation rate to be lower than it turns out to be.

In the dynamic AD-AS model,when will a decrease in aggregate demand not result in a lower inflation rate in the short run?

Figure 17-4 -Refer to Figure 17-4.Consider the shift in the short-run Phillips curves shown in the above graph.This shift may be explained by

If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

All of the following have enhanced the Fed's credibility in conducting monetary policy except

Which of the following best describes the negative slope of the short-run Phillips curve?

The key to understanding the short-run trade-off behind the Phillips curve is that an increase in inflation will decrease unemployment if the inflation is ________ by both workers and firms.

If expected inflation falls,the long-run Phillips curve will

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A.The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?

In the dynamic AD-AS model,when will an increase in aggregate demand not result in lower unemployment rates in the short run?

If the economy experiences a(n)________,inflation will rise and real GDP will fall.

According to the ________ Phillips curve,the unemployment rate and the inflation rate are negatively related.

One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates,leading to speculative bubbles in stocks or other financial assets as investors

A decrease in cyclical unemployment will

Figure 17-1 -Refer to Figure 17-1.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?

According to ________,the economy is normally at potential GDP.

If the Fed chose to change its policy actions implemented during the heart of the recession faster than the timing suggested by the White House,this would be an indication of the Fed's

Models that focus on factors such as technology shocks rather than "monetary" explanations of fluctuations in real GDP are called

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