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

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008.The short-run effects of rising world commodity prices are shown by

In the late 1970s,proponents of rational expectations argued that

Contractionary monetary policy

Disinflation is a reduction in

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008.The short-run effects of the housing and financial crisis are shown by

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation.If in the process of bringing inflation down by 2 percentage points,real GDP falls by 6 percent for a year,the sacrifice ratio is

If a central bank announced that it was going to decrease inflation by 5%,people revised their inflation expectations downward by 4%,and the central bank only lowered inflation by 1%,the short run Phillips curve would shift

According to the Philips curve diagram,if a central bank takes action to reduce the inflation rate,unemployment is

Which of the following describes the Volcker disinflation most accurately?

Ultimately,the change in unemployment associated with a change in inflation is due to

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 the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level.Suppose at first that the public thought inflation would only drop to 18%,but eventually become convinced that the inflation rate will stay at 12.5%.

Which of the following scenarios is consistent with typical estimates of the sacrifice ratio?

In 1979,Fed Chair Paul Volcker

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,people were expecting inflation to fall to 7% and there was a favorable supply shock.In the short run which of the following made unemployment lower than otherwise?

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008.In the short run the increased prices of world commodities

The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy. -Refer to The Economy in 2008.The effects of the housing and financial crises could be shown by shifting

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 Flosserland has had the same inflation rate for a long time.Which,if either,of the following ideas imply that the unemployment rate in Flosserland would be above the natural rate.

During the mid and last part of the 1990's both inflation and unemployment were low.In general this could have been the result of

Between 1993 and 2001 the U.S.economy experienced