Eco 29 Ch. 21 MyEconLab Questions

A movement to the right along a given MP curve means A. inflation is increasing. B. the federal funds rate is held constant. C. expected future inflation has increased. D. an autonomous policy tightening has occurred.

A

Any factor that shifts the​ __________ curve shifts the​ __________ curve in the​ __________ direction. A. IS; AD; same B. MP; IS; opposite C. ​MP; IS; same D. IS; AD; opposite

A

Describe how​ (if at​ all) the IS​ curve, MP​ curve, and AD curve are affected in the following ​situation: There is a decrease in autonomous consumption. A. The IS and AD curves shift to the left, and the MP curve does not shift. B. All the curves shift to the left, and the IS curve becomes steeper. C. The MP curve is not affected, the IS curve becomes steeper, and the AD curve shifts to the left. D. There is a movement along the MP curve, which decreases the real interest rate, and the IS and AD curves shift to the right. E. The IS and AD curves shift to the right, and the slope of the MP curve becomes steeper.

A

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? A. With a tightening or easing of monetary​ policy, some projected changes in monetary policy independent of the current inflation rate may occur. B. Autonomous tightening or easing of monetary policy is based on a change in the nominal interest​ rate, not the real interest rate. C. Tightening or easing of monetary policy may cause a change in the responsiveness of the real interest rate to the inflation​ rate, not in its autonomous component. D. Tightening or easing of monetary policy is reflected as a movement along the monetary curve rather than an upward or downward shift of the curve

A

The Taylor principle A. holds when λ>0. B. leads to higher real interest rates when inflation decreases. C. implies the IS curve is downward sloping. D. leads a raise of the nominal interest rate equal to the rise in inflation.

A

When r decreases​, this causes a movement along​ the________ curve, and shifts the ​_________ curve. A. IS; AD B. MP; IS C. AD; MP D. MP; AD

A

Which of the following represents a movement along a given AD​ curve? A. Inflation​ decreases, the real interest rate​ decreases, and aggregate output increases. B. Inflation​ decreases, the real interest rate​ decreases, and aggregate output decreases. C. Inflation​ increases, the real interest rate​ increases, and aggregate output increases. D. Inflation​ increases, the real interest rate​ decreases, and aggregate output increases.

A

An autonomous tightening of monetary policy A. causes an upward movement along the monetary policy curve. B. shifts the monetary policy curve upward C. shifts the monetary policy curve downward D. causes a downward movement along the monetary policy curve.

B

How do changes in planned expenditures affect the aggregate demand​ curve? A. The aggregate demand curve shifts to the right if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, government​ purchases, or taxes decrease. B. The aggregate demand curve shifts to the right if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, or government purchases​ increase, or if taxes decrease. C. The aggregate demand curve shifts to the left if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, or government purchases​ increase, or if taxes decrease. D. The aggregate demand curve shifts to the right if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, government​ purchases, or taxes increase.

B

How does an autonomous tightening or easing of monetary policy by the Fed affect the MP​ curve? A. When the Fed decides to raise the real interest rate at any given inflation​ rate, the MP curve shifts downward. Monetary policy​ easing, a decision to lower the real interest rate at any given inflation​ rate, shifts the MP curve upward. B. 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. C. When the Fed decides to lower the real interest rate at any given inflation​ rate, the MP curve shifts upward. Monetary policy​ easing, a decision to raise the real interest rate at any given inflation​ rate, shifts the MP curve downward. D. None of the above are correct.

B

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 A. the monetary policy curve shifted upward. B. the monetary policy curve shifted downward. C. there was an upward movement along the monetary policy curve. D. there was a downward movement along the monetary policy curve.

B

Which of the following causes the MP curve to shift​ down? A. an increase in inflation B. an autonomous easing of monetary policy C. a decrease in inflation D. an autonomous tightening of monetary policy

B

Why is it necessary for the MP curve to have an upward​ slope? A. An​ upward-sloping MP curve encourages consumer and business spending. B. An​ upward-sloping MP curve keeps inflation from spinning out of control. C. If the MP curve has an upward​ slope, it indicates an increase in output and a decrease in unemployment. D. If the MP curve has an upward​ slope, then more liquidity will occur in the banking system.

B

Suppose that a new Fed chair is​ appointed, and his or her approach to monetary policy can be summarized by the following​ statement: "I care only about increasing​ employment; inflation has been at very low levels for quite some​ time; my priority is to ease monetary policy to promote​ employment." How would you expect the monetary policy curve to be​ affected, if at​ all? A. The MP curve will shift downward because decreasing unemployment results in a tightening of monetary policy. B. The MP curve will shift downward because decreasing unemployment results in a loosening of monetary policy. C. The MP curve will shift upward because decreasing unemployment results in a loosening of monetary policy. D. The MP curve will shift upward because decreasing unemployment results in a tightening of monetary policy. What would be the effect on the aggregate demand​ curve? A. The AD curve will shift to the right. B. The AD curve will not change. C. The slope of the AD curve will increase. D. The AD curve will shift to the left.

B, A

Everything else held​ constant, a decrease in autonomous consumer spending will cause the IS curve to shift to the​ ________ and aggregate demand will​ ________. A. left; increase B. right; increase C. left; decrease D. right; decrease

C

Everything else held​ constant, an appreciation of the domestic currency will cause the IS curve to shift to the​ ________ and aggregate demand will​ ________. A. left; increase B. right; increase C. left; decrease D. right; decrease

C

In deriving the aggregate demand curve a ____________ inflation rate leads the central bank to _____________ real interest rates, thereby ___________ the level of equilibrium aggregate output. A. higher, lower, lowering B. higher, lower, raising C. higher, raise, lowering D. lower, raise, lowering

C

Everything else held​ constant, an increase in government spending will cause​ ________. A. the quantity of aggregate demand to decrease B. aggregate demand to decrease C. the quantity of aggregate demand to increase D. aggregate demand to increase

D

Suppose that taxes are decreased and the central bank conducts an autonomous easing of monetary policy. What will be the​ result? A. The IS curve shifts​ right, the MP curve shifts​ up, and there is an ambiguous effect on the AD curve. B. The IS curve shifts​ left, the MP curve shifts​ down, and the AD curve shifts right. C. The IS curve shifts​ left, the MP curve shifts​ up, and the AD curve shifts left . D. The IS curve shifts​ right, the MP curve shifts​ down, and the AD curve shifts right.

D

The MP curve gives the relationship between the A. real interest rate and aggregate output. B. nominal interest rate and the inflation rate. C. nominal interest rate and aggregate output. D. real interest rate and the inflation rate.

D