Exam 9: The Goals of Stabilization Policy: Low Inflation and Low Unemployment

From the quantity equation we find that the rate of inflation is equal by definition to the growth rate of the money supply ________ the growth rate of velocity ________ the growth rate of real GDP.

A legitimate objection to the government issuance of "indexed" bonds is that they

Suppose the U.S. public holds $1 trillion in government bonds, all with an 8 percent nominal interest rate. If the Federal Reserve can hold that nominal rate constant, what inflation rate would make the government's net interest expense exactly zero?

If the nominal interest rate is 10% and expected inflation is 5%, the real expected interest rate is

If short-term government bond rates were indexed

If the private sector wishes to hold a constant quantity of real government bonds, inflation requires that the private sector continuously ________ those bonds, so that the government ends up having to pay out interest on net equal to the ________ interest rate times the bonds outstanding.

The "nominal" interest rate is the

An increase in the amount and time period for which unemployment compensation is paid will most likely

When the Federal Reserve raises the growth rate of the money supply to a permanently higher level, this produces ________ in real GDP and ________ in the inflation rate.

For inflation to have no real effect on the economy, leaving all decisions and their real outcomes unchanged, five conditions must be met. Which of the following incorrectly states one of those conditions?

When Okun's "misery index" is used to judge macroeconomic conditions, inflation is being considered

A person who purchased a house with a small down payment just before an unanticipated inflation hits has ________ from the decision to be in debt, and has ________ by having an asset in the form of a house.

In what year did the unemployment rate in the United States reach its highest level since the Great Depression of the 1930s?

In the United States, who determines the combination of bond and money creation that finances the federal budget deficit?

From the quantity equation we find that the rate of inflation is equal by definition to the growth rate of nominal GDP ________ the growth rate of real GDP.

Lengthening of the average unemployment spell suggests that ________ unemployment is growing in importance.

Holding the actual unemployment rate below the natural unemployment rate eventually causes the natural rate to fall toward the actual, according to the ________ hypothesis, implying that an aggressive stimulative demand policy causes a ________ acceleration of inflation.

In the late 1980s, Canada embarked on an ambitious policy of reducing inflation to zero. Inflation did come down, while the unemployment rate ________, which ________ the U.S. disinflation experience of the 1980s.

The actual real interest rate and the expected real interest rate will be identical if

"Mismatch" unemployment is another name for ________ unemployment.