Exhibit 17-5 Short-run and long-run Phillips curve
Suppose the government shown in Exhibit 17-5 uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have rational expectations, then:
A. the economy will remain stuck at point E1.
B. the natural rate will permanently increase to 8 percent.
C. unemployment will rise to 8 percent in the short run.
D. unemployment will remain at 6 percent as the inflation rate falls.
Answer: D
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The seasonally adjusted unemployment rate
A) reports only seasonal unemployment. B) removes the seasonal variation from the unemployment rate. C) is impossible to compute since no one knows what the seasonal component equals. D) is another name for structural unemployment.
The difference between U.S. financial regulation between the 1930s-to-1980 period and the 1980-to-2010 period is:
a. The earlier period was characterized by relatively loose government regulations and the later one was characterized by stricter government regulations. b. The earlier period was characterized by heavy use of the originate-to-hold" strategy. c. The earlier period was characterized by recurring, nation-wide speculative housing bubbles. d. The earlier period was characterized by heavy use of securitization. e. All of the above.