Exam 23: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

According to the long-run Phillips curve, which of the following will be the end result of an expansionary monetary policy when unemployment is at its natural rate?

A sudden technological breakthrough in an economy would:

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves Refer to Figure 14.1.The movement from point A to point B to point C results in:

If the actual unemployment rate is below the natural rate of unemployment, then the actual inflation rate must exceed the expected inflation rate, and the economy will be operating along the short-run Phillips curve.

When workers expect more inflation than actually occurs:

If the Fed follows a high-growth monetary policy, but workers believe that the policy is time inconsistent, then low-wage contracts will be in force and unemployment will decline.

When the money supply increases by $5 billion, tax revenues are $10 billion, and government borrowing is $30 billion, government spending must equal:

Consider a nation experiencing the relationship illustrated by the short run Phillips curve.An increase in both unemployment and inflation in this nation over the next ten years can be explained by:

The hypothesis of political business cycles is based on the assumption that a vertical Phillips curve always holds.

If credible low-money-growth policies were continually pursued by the Fed, nominal wages and prices would eventually fall as the economic agents would expect lower inflation rates over time.

Irrespective of whether the inflation rate is high or low, if the inflation rate is above the expected level, the unemployment rate in the economy will remain stable.

The figure given below depicts the long run equilibrium in an economy. Figure 14.1 In the figure: AD₁ and AD₂: Aggregate demand curves AS₁ and AS₂: Aggregate supply curves Refer to Figure 14.1.Movement from point A to point C is equivalent to: