# If actual inflation is lower than expected inflation

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Chapter 19 / Exercise 7a
Exploring Macroeconomics
Sexton
Expert Verified
41.If actual inflation is lower than expected inflation, then the actual real wage is higher than the expected real wage. This being the case, firms will lay off workers.A) TrueB) FalseCorrect Answer(s):True
Points Earned:1.5/1.5
42.According to the Taylor Rule described in the lectures, if the Fed is getting an A+, then the federal funds rate should be set at 5%.
Points Earned:1.5/1.5
##### We have textbook solutions for you!
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Chapter 19 / Exercise 7a
Exploring Macroeconomics
Sexton
Expert Verified
43.According to the Taylor principle, if actual inflation rises by 1% over target inflation, then the Fed should raise the federal funds rate by 2% to make sure that the real federal funds rate rises which is referred to as "leaning against the wind."
Points Earned:1.5/1.5
44.If the actual federal funds rate is higher than the funds rates implied by the Taylor rule, then we say that the central bank is hawkish.
Points Earned:1.5/1.5
45.If actual inflation rises one percent above target and the central bank raises the actual fundsrate by one percent then according to the Taylor rule, the central bank is being hawkish.A) TrueB) FalseCorrect Answer(s):False
Points Earned:1.5/1.5
46.According to the Taylor rule, the Greenspan Fed was hawkish during the new economy years.
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47.According to the Taylor rule, the Greenspan Fed was hawkish during the job-less recovery as well as the job-loss recovery.
Points Earned:1.5/1.5
48.One way to explain the apparent tradeoff between inflation and unemployment during the 1960s, expected inflation was consistently higher than the actual inflation implying that firms would be willing to hire more workers given this difference between expected and actual inflation. The result therefore would be higher inflation and lower unemployment, consistent with the facts during the 1960s.
Points Earned:1.5/1.5
Points Earned:1.5/1.5
50.According to the Phillips curve analysis, if expected inflation is equal to actual inflation then we are at NAIRU. However, if actual inflation is higher than expected, then the actual unemployment rate will be higher than that associated with NAIRU.A) TrueB) FalseCorrect Answer(s):False
Points Earned:1.5/1.5
51.If firms and workers had perfect foresight as to inflation so that actual = expected inflation at all times, then the Phillips curve would be vertical and thus, there would be no trade between unemployment and inflation, even in the short run.
Points Earned:1.5/1.5
52.We argued that a federal funds rate target of 4% is consistent with the stance of monetary policy being neutral as in neither tight nor loose.
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