Question 1

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point A in the figure above.Which of the following is true?

Accepted Answer

At point A on the Phillips curve, the economy is at the intersection of the short-run Phillips curve and the long-run Phillips curve, indicating that actual inflation matches expected inflation.

Question 2

Figure 17-2 
-Refer to Figure 17-2.At which point are inflation expectations equal to the actual inflation rate?

Accepted Answer

The answer of Figure 17-2 
-Refer to Figure 17-2.At which...

Question 3

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

Accepted Answer

The Fed decreasing the money supply will lead to a decrease in inflation, which will shift the aggregate supply curve to the left. This will lead to a decrease in output and a decrease in the price level, moving the economy to point A in the long run.

Question 4

When will an increase in aggregate demand not result in lower unemployment rates in the short run?

Accepted Answer

The answer of When will an increase in aggregate demand...

Question 5

If the rate of inflation in the economy is steady at 5 percent per year,how does the short-run Phillips curve predict that the unemployment rate will be changing,if at all? Does your answer change if inflation in the economy is 0 percent? Illustrate your answer with a Phillips curve.

Accepted Answer

The answer of If the rate of inflation in the...

Question 6

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point B.If the Fed increases the money supply so that inflation increases,the economy will ________ in the short run,holding all else constant.

Accepted Answer

The answer of Figure 17-2 
-Refer to Figure 17-2.Suppose the...

Question 7

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

The answer of If the unemployment rate in the economy...

Question 8

When will a decrease in aggregate demand not result in a lower inflation rate in the short run?

Accepted Answer

The answer of When will a decrease in aggregate demand...

Question 9

Workers at a local construction company are paid $32.50 per hour,and they have incorporated a 4 percent annual raise in their contracts to account for expected inflation.Explain how unexpected inflation of 2 percent will affect the real wages earned by these workers and the unemployment rate of these workers.

Accepted Answer

The answer of Workers at a local construction company are...

Question 10

What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?

Accepted Answer

The answer of What action should the Fed take if...

Question 11

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point B in the figure above.Which of the following is true?

Accepted Answer

The answer of Figure 17-2 
-Refer to Figure 17-2.Suppose the...

Question 12

Figure 17-2 
-Refer to Figure 17-2.At which point is the unemployment rate equal to the natural rate of unemployment?

Accepted Answer

The answer of Figure 17-2 
-Refer to Figure 17-2.At which...

Question 13

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point C in the figure above.If workers adjust their expectations of inflation,which of the following will be true?

Accepted Answer

If workers adjust their expectations of inflation, the short-run Phillips curve will shift to the left. This is because if workers expect lower inflation, they will demand lower wage increases, which will in turn reduce the cost pressures faced by firms and shift the Phillips curve leftward. This shift implies that for any given level of unemployment, the economy will experience lower inflation. Therefore, the economy will move from point C to a point to the left of the current Phillips curve, such as point A. The other options are not necessarily true based on the given information.

Question 14

The expansionary monetary and fiscal policies of the 1960s resulted in

Accepted Answer

Expansionary monetary and fiscal policies result in an increase in the money supply, leading to higher inflation rates. However, this also stimulates economic growth, which can lower unemployment rates. Therefore, the expansionary policies of the 1960s resulted in high inflation rates and relatively low rates of unemployment, making option D the correct answer.

Question 15

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point A.The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?

Accepted Answer

Lowering the unemployment rate permanently below the natural rate will cause an increase in aggregate demand and result in a shift to the right of the AD curve. As a result, the economy will move from point A to point B in the short run, leading to lower unemployment and higher inflation. However, in the long run, the increase in aggregate demand will cause firms to raise prices and wages in response to higher demand for goods and labor. As a result, inflation will accelerate in the long run.

Question 16

An increase in the expected inflation rate will

Accepted Answer

An increase in the expected inflation rate will shift the short-run Phillips curve to the right, indicating that a higher inflation rate is associated with a higher unemployment rate in the short run. This is because workers and firms adjust their behavior in response to expected inflation, and higher expected inflation leads to higher nominal wages and prices, making it more expensive for firms to hire workers and reducing demand for labor, resulting in higher unemployment.

Question 17

Figure 17-2 
-Refer to Figure 17-2.The nonaccelerating inflation rate of unemployment,or NAIRU,is associated with which point rate in the figure above?

Accepted Answer

The answer of Figure 17-2 
-Refer to Figure 17-2.The nonaccelerating...

Question 18

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point A in the figure above.Which of the following is true?

Accepted Answer

The answer of Figure 17-2 
-Refer to Figure 17-2.Suppose the...

Question 19

If workers accurately predict the rate of inflation,is there a short-run trade-off between inflation and unemployment,as predicted by the Phillips curve? Why or why not?

Accepted Answer

The answer of If workers accurately predict the rate of...

Question 20

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

Accepted Answer

The answer of Does the short-run Phillips curve have a...

Quiz 17: Inflation, unemployment, and Federal Reserve Policy

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A in the figure above.Which of the following is true?

Figure 17-2 -Refer to Figure 17-2.At which point are inflation expectations equal to the actual inflation rate?

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

When will an increase in aggregate demand not result in lower unemployment rates in the short run?

If the rate of inflation in the economy is steady at 5 percent per year,how does the short-run Phillips curve predict that the unemployment rate will be changing,if at all? Does your answer change if inflation in the economy is 0 percent? Illustrate your answer with a Phillips curve.

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point B.If the Fed increases the money supply so that inflation increases,the economy will ________ in the short run,holding all else constant.

When will a decrease in aggregate demand not result in a lower inflation rate in the short run?

What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point B in the figure above.Which of the following is true?

Figure 17-2 -Refer to Figure 17-2.At which point is the unemployment rate equal to the natural rate of unemployment?

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point C in the figure above.If workers adjust their expectations of inflation,which of the following will be true?

The expansionary monetary and fiscal policies of the 1960s resulted in

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A.The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?

An increase in the expected inflation rate will

Figure 17-2 -Refer to Figure 17-2.The nonaccelerating inflation rate of unemployment,or NAIRU,is associated with which point rate in the figure above?

Figure 17-2 -Refer to Figure 17-2.Suppose the economy is at point A in the figure above.Which of the following is true?

If workers accurately predict the rate of inflation,is there a short-run trade-off between inflation and unemployment,as predicted by the Phillips curve? Why or why not?

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