ECO 29 21
Why is it necessary for the MP curve to have an upward slope?
An upward-sloping MP curve keeps inflation from spinning out of control.
Suppose that taxes are decreased and the central bank conducts an autonomous easing of monetary policy. What will be the result?
The IS curve shifts right, the MP curve shifts down, and the AD curve shifts right.
Everything else held constant, an increase in government spending will cause ________.
aggregate demand to increase
Which of the following causes the MP curve to shift down?
an autonomous easing of monetary policy
The Taylor principle
holds when lambda greater than 0.
A movement to the right along a given MP curve means
inflation is increasing
The MP curve gives the relationship between the
real interest rate and the inflation rate
Any factor that shifts the __________ curve shifts the __________ curve in the __________ direction.
Any factor that shifts the __________ curve shifts the __________ curve in the __________ direction.
Which of the following represents a movement along a given AD curve?
Inflation decreases, the real interest rate decreases, and aggregate output increases.
How do changes in planned expenditures affect the aggregate demand curve?
The aggregate demand curve shifts to the right if autonomous consumption, autonomous investment, autonomous net exports, or government purchases increase, or if taxes decrease.
How does an autonomous tightening or easing of monetary policy by the Fed affect the MP curve?
When the Fed decides to raise the real interest rate at any given inflation rate, the MP curve shifts upward. Monetary policy easing, a decision to lower the real interest rate at any given inflation rate, shifts the MP curve downward
How is an autonomous tightening or easing of monetary policy different than a change in the real interest rate due to a change in the current inflation rate?
With a tightening or easing of monetary policy, some projected changes in monetary policy independent of the current inflation rate may occur.
When the financial crisis started in August 2007, inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate, which indicated that
the monetary policy curve shifted downward.
The MP curve is _________ sloping due to the Taylor principle.
upward
When r decreases, this causes a movement along the________ curve, and shifts the _________ curve.
IS; AD
Everything else held constant, a decrease in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.
left; decrease
Everything else held constant, an appreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.
left; decrease