Question 1

In the long run, the Phillips curve is a ________ at ________.

Accepted Answer

A)   horizontal line; 0% inflation
B)   negatively sloped line; the intersection of aggregate demand and short-run aggregate supply
C)   vertical line; the natural rate of unemployment
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 2

Use the information below to explain adjustments that move the economy to a long-run equilibrium. Assume that firms and workers have adaptive expectations.
The current unemployment rate = 4%.
The natural rate of unemployment = 6%.
Last year's inflation rate = 3%.
This year's inflation rate = 4%.

Accepted Answer

If firms and workers have adaptive expec...

Question 3

Figure 28-6 
-Refer to Figure 28-6. If firms and workers have adaptive expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

Accepted Answer

A)   point B to point C.
B)   point A to point C.
C)   point A to point B.
D)   point B to point A.
E)   point C to point B.F) B) and C)
G) All of the above

Question 4

According to the short-run Phillips curve, which of the following would result in low rates of unemployment?

Accepted Answer

A)   weak increases in aggregate supply
B)   a lower inflation rate
C)   weak increases in aggregate demand
D)   a higher inflation rateE) A) and B)
F) B) and D)

Question 5

The short-run Phillips curve will not shift unless there is

Accepted Answer

A)   an increase in the unemployment rate.
B)   an increase in inflation that is unanticipated.
C)   a decrease in inflation that is unanticipated.
D)   a change in inflation expectations.E) None of the above
F) C) and D)

Question 6

If wages and prices adjust rapidly, we would expect expansionary monetary policy to be

Accepted Answer

A)   more likely to reduce the natural rate of unemployment.
B)   more likely to affect the unemployment rate.
C)   less likely to affect the unemployment rate.
D)   less likely to result in a vertical short-run Phillips curve.E) All of the above
F) A) and C)

Question 7

When unemployment is below its natural rate, the inflation rate will eventually

Accepted Answer

A)   increase.
B)   decrease.
C)   move to its natural rate.
D)   become equal to the natural rate of unemployment.E) All of the above
F) A) and D)

Question 8

If weak aggregate demand is pushing the economy into recession, which of the following must be true?

Accepted Answer

A)   The economy is at an equilibrium that is on the long-run aggregate supply curve.
B)   The economy is at an equilibrium that is on the long-run Phillips curve.
C)   The economy is at an equilibrium that is not on the long-run Phillips curve.
D)   Contractionary monetary policies will push the economy back to the long-run Phillips curve.E) All of the above
F) A) and D)

Question 9

Empirical evidence shows that the short-run Phillips curve was vertical during the 1950s and 1960s.

Accepted Answer

A) True 
 B)False

Question 10

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

Accepted Answer

The short-run Phillips curve has a negat...

Question 11

Last year, the unemployment rate was 4 percent and the inflation rate was 3 percent. If the natural rate of unemployment is 3 percent, how do you expect inflation to change?

Accepted Answer

Inflation is only stable when the unempl...

Question 12

If workers and firms raise their inflation expectations,

Accepted Answer

A)   unemployment will fall.
B)   actual inflation will fall to match expected inflation.
C)   the short-run Phillips curve will be vertical.
D)   the short-run Phillips curve will shift upward.E) C) and D)
F) A) and B)

Question 13

Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.

Accepted Answer

A) True 
 B)False

Question 14

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of anticipated changes in monetary policy.

Accepted Answer

A)   negatively sloped
B)   positively sloped
C)   vertical
D)   horizontalE) B) and C)
F) A) and D)

Question 15

If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.

Accepted Answer

If the unemployment rate is constant at ...

Question 16

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.

Accepted Answer

A)   negatively sloped
B)   positively sloped
C)   vertical
D)   horizontalE) B) and D)
F) C) and D)

Question 17

A decrease in aggregate demand will

Accepted Answer

A)   cause inflation.
B)   decrease unemployment.
C)   move the economy to a lower point on the short-run Phillips curve.
D)   cause the short-run Phillips curve to shift to the right.E) All of the above
F) A) and B)

Question 18

If the Federal Reserve chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation, which of the following would you expect to see?

Accepted Answer

A)   an upward shift of the short-run Phillips curve
B)   a downward shift of the short-run Phillips curve
C)   a decrease in the long-run aggregate supply curve
D)   Both B and C are correct answers.E) A) and D)
F) B) and D)

Question 19

What does it mean to say that workers and firms have rational expectations?

Accepted Answer

Rational expectations means that workers...

Question 20

Which of the following could increase unemployment and inflation simultaneously?

Accepted Answer

A)   an increase in oil prices
B)   expansionary monetary policy
C)   contractionary monetary policy
D)   a decrease in the real wageE) A) and C)
F) A) and B)

Exam 28: Inflation, Unemployment, and Federal Reserve Policy

Figure 28-6 -Refer to Figure 28-6. If firms and workers have adaptive expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

Correct Answer
verified

Which of the following could increase unemployment and inflation simultaneously?

Correct Answer
verified

If wages and prices adjust rapidly, we would expect expansionary monetary policy to be

Correct Answer
verified

Empirical evidence shows that the short-run Phillips curve was vertical during the 1950s and 1960s.

Correct Answer
verified

Use the information below to explain adjustments that move the economy to a long-run equilibrium. Assume that firms and workers have adaptive expectations. The current unemployment rate = 4%. The natural rate of unemployment = 6%. Last year's inflation rate = 3%. This year's inflation rate = 4%.

Correct Answer
verified
If firms and workers have adaptive expec...
View Answer

Correct Answer
verified
If the unemployment rate is constant at ...
View Answer

What does it mean to say that workers and firms have rational expectations?

Correct Answer
verified
Rational expectations means that workers...
View Answer

If weak aggregate demand is pushing the economy into recession, which of the following must be true?

Correct Answer
verified

If workers and firms raise their inflation expectations,

Correct Answer
verified

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of anticipated changes in monetary policy.

Correct Answer
verified

In the long run, the Phillips curve is a at .

Correct Answer
verified

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.

Correct Answer
verified

Last year, the unemployment rate was 4 percent and the inflation rate was 3 percent. If the natural rate of unemployment is 3 percent, how do you expect inflation to change?

Correct Answer
verified
Inflation is only stable when the unempl...
View Answer

When unemployment is below its natural rate, the inflation rate will eventually

Correct Answer
verified

A decrease in aggregate demand will

Correct Answer
verified

The short-run Phillips curve will not shift unless there is

Correct Answer
verified

If the Federal Reserve chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation, which of the following would you expect to see?

Correct Answer
verified

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

Correct Answer
verified
The short-run Phillips curve has a negat...
View Answer

Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.

Correct Answer
verified

According to the short-run Phillips curve, which of the following would result in low rates of unemployment?

Correct Answer
verified

Exam 28: Inflation, Unemployment, and Federal Reserve Policy

Figure 28-6 -Refer to Figure 28-6. If firms and workers have adaptive expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

Correct AnswerverifiedShow Answer

Which of the following could increase unemployment and inflation simultaneously?

Correct AnswerverifiedShow Answer

If wages and prices adjust rapidly, we would expect expansionary monetary policy to be

Correct AnswerverifiedShow Answer

Empirical evidence shows that the short-run Phillips curve was vertical during the 1950s and 1960s.

Correct AnswerverifiedShow Answer

Use the information below to explain adjustments that move the economy to a long-run equilibrium. Assume that firms and workers have adaptive expectations. The current unemployment rate = 4%. The natural rate of unemployment = 6%. Last year's inflation rate = 3%. This year's inflation rate = 4%.

Correct AnswerverifiedIf firms and workers have adaptive expec...View AnswerShow Answer

Correct AnswerverifiedIf the unemployment rate is constant at ...View AnswerShow Answer

What does it mean to say that workers and firms have rational expectations?

Correct AnswerverifiedRational expectations means that workers...View AnswerShow Answer

If weak aggregate demand is pushing the economy into recession, which of the following must be true?

Correct AnswerverifiedShow Answer

If workers and firms raise their inflation expectations,

Correct AnswerverifiedShow Answer

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of anticipated changes in monetary policy.

Correct AnswerverifiedShow Answer

In the long run, the Phillips curve is a ________ at ________.

Correct AnswerverifiedShow Answer

According to the "rational expectations" school of thought in macroeconomics, the short-run Phillips curve is ________ in face of unanticipated changes in monetary policy.

Correct AnswerverifiedShow Answer

Last year, the unemployment rate was 4 percent and the inflation rate was 3 percent. If the natural rate of unemployment is 3 percent, how do you expect inflation to change?

Correct AnswerverifiedInflation is only stable when the unempl...View AnswerShow Answer

When unemployment is below its natural rate, the inflation rate will eventually

Correct AnswerverifiedShow Answer

A decrease in aggregate demand will

Correct AnswerverifiedShow Answer

The short-run Phillips curve will not shift unless there is

Correct AnswerverifiedShow Answer

If the Federal Reserve chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation, which of the following would you expect to see?

Correct AnswerverifiedShow Answer

Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.

Correct AnswerverifiedThe short-run Phillips curve has a negat...View AnswerShow Answer

Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.

Correct AnswerverifiedShow Answer

According to the short-run Phillips curve, which of the following would result in low rates of unemployment?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If firms and workers have adaptive expec...
View Answer

Correct Answer
verified
If the unemployment rate is constant at ...
View Answer

Correct Answer
verified
Rational expectations means that workers...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the long run, the Phillips curve is a at .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Inflation is only stable when the unempl...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The short-run Phillips curve has a negat...
View Answer

Correct Answer
verified

Correct Answer
verified