Money & Inflation
This happens when too much money chases too few goods.
What is inflation?
Unemployment that comes from temporary job transitions.
What is frictional unemployment?
A decrease in consumer confidence shifts which curve, and in which direction?
AD to the left.
The Fed raises interest rates to fight inflation. This is called ______ policy.
Contractionary monetary policy.
This crustacean is Maine’s unofficial ambassador and occasionally the main character in tourist T-shirts.
What is the lobster?
The “inflation tax” describes how this loses value when new money enters the economy.
What is purchasing power?
When real GDP is below potential output, unemployment is generally ______.
What is higher than the natural rate?
An oil price spike is this type of shock and moves SRAS which way?
Negative supply shock → SRAS left.
Lowering taxes and increasing spending is this type of policy.
Expansionary fiscal policy.
This Maine dessert is so famous it has an entire festival in Rockland.
What is blueberry pie?
Rapid, out-of-control inflation—often over 50% per month—is known as this.
What is hyperinflation?
Unemployment caused by a mismatch between worker skills and job needs.
What is structural unemployment?
If expectations of inflation rise, this curve shifts to reflect higher future costs.
SRAS (left).
The Fed’s main tool for changing interest rates is adjusting this target.
The federal funds rate.
This 3-letter Maine beverage is either beloved or feared depending on who you ask.
What is Moxie?
In the classical model, these two variables move together even in the short run.
What are the money supply and price level?
This type of unemployment rises during recessions and falls during expansions.
What is cyclical unemployment?
In the long run, all of the economy’s adjustments mainly work through this variable.
Nominal wages.
If the economy is in a recession, the Fed should generally move interest rates in this direction.
Down.
This mountain is the highest point in Maine.
What is Mount Katahdin?
Name one example of a country in the last 50 years that experienced hyperinflation.
What is Zimbabwe / Venezuela / Yugoslavia / etc.
When actual output exceeds potential output, what happens to nominal wages over time?
They rise (pushing SRAS left).
If AD shifts right and SRAS shifts left at the same time, the price level ______ and output ______.
Rises; ambiguous (could rise or fall).
Fiscal policy is limited by these two “lags”: ______ and ______.
Recognition lag, implementation lag.
This phenomenon describes Maine’s seasons as “almost winter, winter, still winter, and ______.”
What is mud season?