Question : 15.3   Influencing Inflation and Unemployment 1) The expected inflation rate the A) : 1240603

15.3   Influencing Inflation and Unemployment

1) The expected inflation rate is the

A) inflation rate that people forecast and use to set the money wage and other money prices.

B) rate that people expect the Bureau of Labor Statistics to announce each month, on which bookies take bets.

C) inter-annual, non-energy inflation rate.

D) inflation rate that the Federal Reserve system announces as the policy goal for the year.

E) same as the actual inflation rate.

2) When people use all the relevant data and principles of economics to forecast inflation, they are making

A) a mistake.

B) what is called a “rational expectation.”

C) an exaggerated forecast.

D) an always accurate forecast.

E) what is called a “data-based forecast.”

3) A major factor in determining the rational expectation of inflation is

A) forecasts of fiscal policy.

B) forecasts of the Fed’s monetary policy.

C) the previous month’s unemployment rate.

D) the recent past behavior of the stock market.

E) the size of the budget deficit.

4) When all relevant information is used to forecast inflation, the resulting forecast is called

A) a rational expectation.

B) an expected forecast.

C) a natural expectation.

D) an expansionary expectation.

E) the expected expectation.

5) A country reports that its inflation rate and unemployment rate have both increased. These changes could be the result of

A) a movement upward along the short-run Phillips curve.

B) a movement downward along the short-run Phillips curve.

C) an upward shift of the short-run Phillips curve.

D) a downward shift of the short-run Phillips curve.

E) a leftward shift of the long-run Phillips curve.

6) During early 2001, the Fed unexpectedly increased the money supply. The effect of this policy was a

A) movement downward along the short-run Phillips curve.

B) movement upward along the short-run Phillips curve.

C) upward shift of the short-run Phillips curve.

D) downward shift of the short-run Phillips curve.

E) rightward shift of the long-run Phillips curve.

7) In the short run, an increase in inflation by the Fed not matched by an increase in the expected inflation rate results in ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

A) no change; no change

B) a leftward shift; an upward shift

C) no change; a downward shift

D) a rightward shift; an upward shift

E) a rightward shift; a downward shift

8) If the Fed raises the inflation rate and initially expected inflation does not change, in the short run the unemployment rate ________ the natural unemployment rate, and in the long run the unemployment rate ________ the natural unemployment rate.

A) is less than; is less than

B) is larger than; equals

C) is larger than; is larger than

D) is less than; is larger than

E) is less than; equals

9) If the Fed lowers the inflation rate and initially expected inflation does not change, in the short run the unemployment rate ________, and in the long run the unemployment rate ________ the natural unemployment rate.

A) does not change; is equal to

B) falls; is equal to

C) rises; is equal to

D) rises; is greater than

E) does not change; is greater than

10) The inflation-reduction episode of the early 1980s was an example of an

A) unexpected inflation reduction fiscal policy by Congress.

B) unexpected inflation reduction by the Fed.

C) expected inflation reduction by the Fed.

D) expected inflation reduction fiscal policy by Congress.

E) unexpected inflation reduction by the Fed combined with an expected inflation reduction fiscal policy by Congress.