Exam 22: The Short Run Trade Off Between Inflation and Unemployment: The Cost of Reducing Inflation

Monetary Policy in Flosserland In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years. -Refer to Monetary Policy in Flosserland.Suppose that the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level.Suppose that the public was very skeptical and in fact thought the Flosserland Department of Finance was going to raise inflation to 30% so it could increase its expenditures.Then

Suppose the economy is currently experiencing 9% inflation per year.If the Fed wants to reduce inflation to 3% and the sacrifice ratio is 4,then how much annual output must be sacrificed in the transition?

Monetary Policy in Mokania Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate. -Refer to Monetary Policy in Mokania.The Bank of Mokania reduced inflation to its announced goal of 5%.However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year.Which of the following is correct?

Considering a plot of the inflation rate and the unemployment rate,one might conjecture that the short run Phillips curve was further to the right in the first part of the 2000's than it was in the last part of the 1990s and 2000.

If the Fed announced a policy to reduce inflation and people found it credible,the short-run Phillips curve would shift

The monetary-policy framework called inflation targeting is used explicitly by

The arguments of Friedman and Phelps would suggest that other things the same,a country that pursues a disinflationary policy that the public does not find completely credible

Monetary Policy in Mokania Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate. -Refer to Monetary Policy in Mokania.The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%.If it actually reduces inflation to 3% and people were expecting inflation to fall only to 8%,then

Which of the following played a role in depressing aggregate demand in 2001?

If the Fed reduces inflation 1 percentage point and this makes output fall 2 percentage points and unemployment rise 3 percentage points for six months,the sacrifice ratio is

If a central bank reduced inflation by 2 percentage points and that made output fall by 1 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years,the sacrifice ratio is

Monetary Policy in Mokania Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate. -Refer to Monetary Policy in Mokania.The Bank of Mokania publicizes its intent to reduce the inflation rate to 5%.If it is successful in doing so but people had expected inflation to fall only to 10%,then

The long-run response to a decrease in the money supply growth rate is shown by shifting

Disinflation is defined as a

Suppose a central bank announced that it was going to make a serious effort to fight inflation.A few years later the inflation rate is lower,but there had been a serious recession.We could conclude with certainty that

If a central bank reduced inflation by 2 percentage points and that made output fall by 3 percentage points for 2 years and the unemployment rate rise from 3 percent to 5 percent for 2 years,the sacrifice ratio is

Disinflation would eventually cause

Other things the same,if the central bank decreases the rate at which it increases the money supply,then

A country is likely to have a higher sacrifice ratio if

Monetary Policy in Mokania Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate. -Refer to Monetary Policy in Mokania.The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%.If Mokanians lower their inflation expectations,which curve shifts to the left?