Question 1

Figure 17-2 
-Refer to Figure 17-2.Suppose the Fed used contractionary policy to push short-run equilibrium to point C.If the short-run equilibrium remained at point C long enough,

Accepted Answer

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

Question 2

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 3

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

Accepted Answer

The expansionary monetary and fiscal policies of the 1960s led to an increase in money supply, which in turn caused high inflation rates. However, these policies also led to an increase in consumer spending and investment, resulting in low rates of unemployment. Thus, the correct answer is D, high inflation rates and low rates of unemployment.

Question 4

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 5

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 6

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 7

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 8

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 9

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 10

Figure 17-2 
-Refer to Figure 17-2.Suppose the Fed used expansionary policy to push short-run equilibrium to point B.If the short-run equilibrium remained at point B long enough,

Accepted Answer

If the short-run equilibrium remains at point B long enough, the expansionary policy will lead to an increase in aggregate demand, which will increase output and lower unemployment in the short run. However, this will also lead to an increase in the price level, moving the economy up along the short-run Phillips curve. As a result, the short-run Phillips curve will shift up, indicating that there is a higher rate of inflation for any given level of unemployment. In the long run, the economy will eventually move back to its natural rate of unemployment at point A, but this will only happen if there are no further policy interventions.

Question 11

A decrease in the expected inflation rate will

Accepted Answer

A decrease in expected inflation rate will shift the short-run Phillips curve to the left, indicating a decrease in the inflation rate for any given level of unemployment. This is because if people expect lower inflation, they will demand lower wages, which will reduce firms' costs and allow them to lower prices. As a result, there will be less pressure on firms to raise prices, even at low levels of unemployment.

Question 12

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

When workers adjust their expectations of inflation, the short-run Phillips curve will shift to the left. This is because if workers expect a lower inflation rate, firms will have less room to raise prices without losing sales, resulting in lower actual inflation rates and a lower natural rate of unemployment. Therefore, the new equilibrium point will be at a lower level of unemployment and inflation.

Question 13

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...

Question 14

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

Point A is where the short-run aggregate supply curve (SRAS1) intersects the aggregate demand curve (AD). At this equilibrium, the unemployment rate is equal to the natural rate of unemployment, which is the rate of unemployment when the economy is producing at its potential output level. The figure does not provide information on the expected rate of inflation or actual inflation. It also does not indicate whether the economy will move from A to B.

Question 15

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 16

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

If the Fed uses expansionary monetary policy to permanently lower the unemployment rate below the natural rate associated with point A, there will be increased demand for goods and services, leading to higher prices and ultimately accelerating inflation in the long run.

Question 17

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 18

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 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

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...

Quiz 17: Inflation,unemployment,and Federal Reserve Policy

Figure 17-2 -Refer to Figure 17-2.Suppose the Fed used contractionary policy to push short-run equilibrium to point C.If the short-run equilibrium remained at point C long enough,

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?

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

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.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 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 Fed used expansionary policy to push short-run equilibrium to point B.If the short-run equilibrium remained at point B long enough,

A decrease in the expected inflation rate will

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?

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

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.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.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?

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.

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

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?