Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Use the following to answer questions Figure: Understanding Phillips Curves -(Figure: Understanding Phillips Curves)What is the expected inflation rate associated with Phillips curve PC_b?

Graph the Phillips curve using the data in the following table. Unemployment Rate Inflation Rate 8.0% -2% 5.0 0 3.0 2 2.5 4 2.0 6 Suppose the government were to implement a supply-side fiscal policy aimed at increasing worker productivity by 2%.Show on a graph the impact of the policy on the Phillips curve.What are the implications of the productivity change for policymakers regarding unemployment targeting?

How was the 2007-2009 recession different from the previous two recessions?

The long-run Phillips curve shows:

If the economy is in a jobless recovery,output grows with little growth in employment.

In the original Phillips curve analysis,stagflation would be impossible.

Some argue that the financial crisis of 2007-2008 was caused by a poor understanding of risks in the economy.One reason for this is that:

In a jobless recovery:

A financial instrument backed by a collection of mortgages is called a(n):

One of the key factors leading to the great recession was:

The adaptive expectations model concludes that individuals use past events to form expectations.

Suppose the central bank announces to the public that it will increase the money supply.However,it later changes its mind and decides to do nothing.What will happen to the short-run unemployment rate if people use rational expectations and are initially unaware of the policy reversal? Use a graph to support your response.

The recession of 2007-2009 probably lasted longer than other postwar recessions because it was associated with a bank-centered financial crisis.

Use an aggregate supply-aggregate demand diagram to illustrate the Great Recession.

Jane claims that the inflation rate next year will decrease because the Federal Reserve has announced an intention to increase the federal funds rate.Which theorist would be vindicated by this behavior?

The Phillips curve shows a positive relationship between wages and unemployment.

Which of the following is NOT a way that hiring practices have changed over the past few decades?

Deflation is a problem because:

According to the equation for the Phillips curve,if wages rise by 2%,inflation:

The unemployment rate during the 2007-2009 recession was _______ the unemployment rate in the previous two recessions.