SOLVED

11) An activist policy to promote high employment ________. A) could lead to inflationary pressures from an ensuing temporary negative supply shock B) might incentivize workers to push for higher wages beyond what productivity gains can justify C) could lead to inflationary pressures from an ensuing increase in aggregate demand D) all of the above E) none of the above 12) If workers push for wages that are beyond what productivity gains can justify ________. A) a positive output gap ensues which will lead to lower unemployment if the Federal Reserve does not act B) a temporary negative supply shock ensues driving up prices C) and the Federal Reserve eases monetary policy aimed at increasing aggregate demand to counter the negative supply shock, the inflation rate will decrease D) all of the above E) none of the above 13) If workers push for wages that are beyond what productivity gains can justify ________. A) a temporary negative supply shock ensues driving up prices B) a negative output gap ensues which will lead to higher unemployment if the Federal Reserve does not act C) and the Federal Reserve eases monetary policy aimed at increasing aggregate demand to counter the negative supply shock, a price-wage spiral could ensue D) all of the above E) none of the above 14) A goal of very high employment may lead to ________. A) inflationary monetary policy B) inflationary fiscal policy C) demand-pull inflation D) all of the above E) none of the above 15) High inflation that persists beyond the ending of expansionary policies is probably ________. A) demand-pull inflation B) Humphrey-Hawkins inflation C) cost-push inflation D) a result of unemployment remaining below the natural rate E) none of the above 16) In the 1965 to 1973 period, U.S. policymakers ________. A) targeted an unemployment rate that, in hindsight, was likely too low B) pursued an easing of monetary policy designed to increase aggregate demand C) made some mistakes that led to the most sustained inflationary episode in U.S. history D) all of the above E) none of the above 17) After 1975, the U.S. economy continued to experience high inflation ________. A) mainly because the public expected policymakers to continue their expansionary efforts, and this led to increases in inflation expectations B) most likely of the cost-push kind C) until a very aggressive commitment to anti-inflationary monetary policy helped end this Great Inflation period D) all of the above E) none of the above 18) On the graphs above, show how the central bank implements a decrease in the inflation target. In words, explain why the change in the real interest rate is temporary. 19) How might strict adherence to the Taylor rule discourage demand-pull inflation? How might demand-pull inflation occur, nonetheless? 20) How might strict adherence to the Taylor rule discourage cost-push inflation?