Question Details

The main reason the chairman of the Fed prefers to have price stability 


1. "For example, the upward shift in the Phillips curve that occurred in the early 1970s followed several years in which policymakers allowed money growth to accelerate in an (ultimately vain) attempt to keep __________. The downward shift in the mid 1980s occurred only after policymakers demonstrated that they were willing to _________ to move the inflation rate lower." 
The blanks are best filled with 
a) interest rates low; reduce the NRU b) real growth low; cut money growth 
c) unemployment low; tolerate high unemployment 
d) the economy at the NRU; impose wage-price controls 
2. "A striking feature of the economy's performance over the past four years is how well behaved inflation has been, despite tight labor markets. This experience has led some analysts to declare the Phillips curve dead! One response is to argue that the Phillips curve is not dead, merely that the ..... ........" This is best completed with 93 
a) short-run Phillips curve has shifted down b) short-run Phillips curve has shifted up 
c) long-run Phillips curve has shifted left d) long-run Phillips curve has shifted right 
3. "American businesses created 262,000 new jobs last month, and unemployment fell to an astoundingly low 4.3%, a level not seen since Feb. 1970. And still no sign of inflation. All this good news is befuddling many economists." This news befuddles economists because it is inconsistent with 
a) the monetarist rule b) fiscal policy goals 
c) a traditional market economy d) the usual Phillips curve analysis 
4. "Despite the inflationary pressures that remained when he took office, President Jimmy Carter was reluctant to mount a strong anti-inflation program lest it interfere with his commitment to ..........." This is best completed with 
a) lower taxes b) productivity growth 
c) lower unemployment d) higher government spending 
5. "The Federal Reserve Bank Act of 1978 requires the Fed to pursue full employment as well as low inflation, but Mr. Greenspan has said that he favors legislation to make price stability the Fed's sole objective." The main reason the chairman of the Fed prefers to have price stability as his sole objective is because 
a)he doesn't care about unemployment 

b) inflation is the easiest goal for the Fed to achieve 
c) inflation is the goal over which the Fed has the greatest influence 
d) pursuing other goals could prevent the Fed from achieving the inflation goal



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