Exam 17: Stabilization in an Integrated World Economy

The hypothesis suggesting that people combine the effects of past policy changes on economic variables with their own judgment about the future effects of current and future economic policy is referred to as the

All of the following would increase the natural rate of unemployment EXCEPT

One implication of coupling the rational expectations hypothesis with the assumption of flexible wages and prices is that

Suppose that the economy is in long-run equilibrium and the government decided to engage in unexpected expansionary policy by increasing the money supply.If we assume rational expectations,which of the following statements is correct about the effect of expansionary policy in the long run?

The short run aggregate supply (SRAS)curve shifts left when oil supply shocks occur because

-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

When "stagflation" occurs,

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

Real business cycles could be a result of

-Refer to the above figure.The rational expectations hypothesis implies that an anticipated increase in aggregate demand from to will

When workers and employers correctly anticipate the rate of inflation,

There is greater support for passive policymaking when

An unexpected decrease in aggregate demand

Suppose the economy has been experiencing zero inflation and 5 percent unemployment for several years.The government decides to lower the unemployment by generating some inflation.Using a graph,show what the short-run effects would be and what would happen in the long run.What would the government have to do to keep the unemployment rate at 3 percent?

At one time,many economists believed that