Macro final

Economist who argued that monetary policy should be made by a room make all the following arguments except that a policy rule:

Is more flexible than discretionary policy

If, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price of a comma along on subs curve

Is vertical

Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the:

Misperceptions theory of the short run aggregate supply curves

Stagflation occurs when the economy experiences

rising prices and falling output

According to the textbook both the adverse supply shock of the 1970s and the favorable supply shock of the 1980s were the result of which of the following?

Political turmoil

An increase in the price of one oil shift the short run Phillips curve______ and the unemployment inflation trade-off becomes _______ favorable.

Shifts upward......more

Economist to argue that policymakers to try to stabilize the economy make all the following arguments except:

Stabilization policy has no effect of the economy in the short run or the long run

When an increase in government purchases causes firms to purchase additional plant and equipment, we have seen a demonstration of

The investment accelerator

The natural rate hypothesis argues that

in the long run, the unemployment rate returns to the natural rate, regardless of inflation

If people have rational expectations, a monetary policy contraction that is announced and is credible could

reduce inflation with little or no increase in unemployment.

All of the following would cause the short-run aggregate supply curve to shift to the left except:

People expect inflation to go up

If the sacrifice ratio is five, reduction inflation from 7% to 3% would require a reduction in the output of ______%.

20%

Which of the following changes would cause the aggregate demand curve to shift to the left?

A depreciation of the exchange rate

In the model in chapter 16, an increase in the money supply causes which of the following?

A right word shift in the money demand curve and a movement down along the aggregate demand curve

When actual inflation exceeds expected inflation, the unemployment rate is______ its natural rate and people adjust their expected rate of inflation_____.

Above......upward

What would cause the long run Phillips curve to shift to the

An increase in the minimum wage

How is expansionary monetary policy so if those curve model?

An upward shift in the short run Phillips curve

Which of the following are examples of automatic stabilizers

Both A and B

Which of the following is an argument for using government spending to stimulate the economy rather than tax hikes?

Both a and B

Which of the following is an argument made for the central bank not aiming for zero in

Both a and B

Which of the following is true about government budget deficits?

Both a and B

Which of the following would be a reform of the tax laws that would encourage more savings

Both a and B

A decrease in expected inflation shift the short run Phillips curve______ in the unemployment inflation rate trade-off is _______ favorable.

Downward ....... Less

Initial impact of an increase in taxes as a shift the aggregate______ curve to the______.

Demand......right

In the model of aggregate demand and aggregate supply, the initial impact of a decrease in aggregate demand is to cause the price level to _________ and the level of output to _______.

Increase.....decrease

Starting from the point of long run equilibrium the short run effect of a decrease in the money supply is a_______ in the interest rate and a long-term effect is a_______ in the price Apple.

Increase.....decrease

I kinda miss you support is zero inflation target for monetary policy make all the following arguments except

Inflation erodes peoples income and zero inflation eliminate this proble

The discrepancy between policy announcements and policy actions is known as

Inside lag

For the United States, the most important source of the downward slope of the aggregate demand curve is the

Interest rate effect

According to the internet-rate effect, aggregate demand slopes downward because:

Lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.

Which of the following statements about stabilization policy is true?

Many economists refer automatic stabilizers because they affect the economy with a shorter leg than activist stabilization policy.

The long run aggrave supply curve would shift to the right as a result of which of the following?

Neither A nor B

According to Professor Flanders and the textbook, which is the following statements about fiscal policy multipliers is correct?

Neither A or B

How is the Phillips curve bottle from chapter 17 similar to the auger demand/Irish supply model from chapter 16

Neither a nor b

Which is the following statements regarding taxes is correct?

Neither a nor b

Which of the following is an argument for why policymakers to try to stabilize the economy

Neither a nor b

If the Fed were to continuously use especially monetary policy and attempt to hold unemployment below the natural rate, the long run result would be

Neither a or b

Suppose the economy is initially in a long run equilibrium. Then suppose there is a reduction in military spending. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?

Prices fall; output is unchanged from its initial value.

An increase in the marginal propensity to consume

Raises the value of the multiplier

How long is your run Phillips curve, a higher______ is associated with a____ .

Rate of inflation... Lower unemployment rate

Policymakers are said to "accommodate " an adverse supply shock if they

Respond to the adverse supply shock by demand, which further raises prices.

When is supply and demand for money or expressed in a graph with the interest rate on the virtual access and the quantity of money on the horizontal axis, an increase in the price level shifts money demand to the ________ and _______ the interest rate.

Right......increases

Suppose the government increases its purchases by $16 billion. If the multiplier effect exceeds the crowding out effect, then the aggregate demand curve shifts to the_____ by______ than $16 billion.

Right....more

Tax reform that encourages savings tends to

Shift the tax burden away from high income people towards Low come people

Which of the following is not an argument in support of using text cuts to fight recessions?

Text codes have a more direct impact on aggregate demand and government spending

According to Professor Flanders, when it comes to evaluate in government budget deficits, the only thing that really matters is

The ratio of the national debt to GDP

Keynes's liquidity preferences theory of the interest rate suggest that the interest rate is determined by

The supply and demand for money

Which of the following statements about short-run fluctuations in the economy is correct?

They are reffered to as the bussiness cycle

The misery index, which some commentators suggest measures the health of the economy, is the sum of _____ and the _______.

Unemployment rate..........inflation rate

Natural level of output is the amount of real GDP produced.

When the economy is at the natural rate of unemployment