Ch. 13- Countercyclical Macroeconomic Policy

Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

Increasing income tax rates

The Taylor rule for federal funds rate targeting does which of these things?

It links the Fed's long-run target for the federal funds rate to specific economic variables.

How did the FOMC react to the recession of 2007-2009?

The FOMC reduced the target for the fed funds rate steadily in 2008.

Which of these statements is true about using fiscal policy to stabilize the economy?

The delay caused by the legislative process is typically longer for fiscal policy than for monetary policy.

Many economists believe that tinkering with the economy via fiscal policy is not effective due to:

corrupt politicians.

Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor _____curve to the ________.

demand; left

Government policies that increase aggregate demand are called_________.

expansionary policies

All of these will most likely increase as a result of expansionary monetary policy except:

government purchases.

One problem associated with the recent fiscal stimulus designed to move the economy out of the 2009 recession is __________.

it contributed to higher budget deficits

If the Fed wants to stimulate the economy, it will ________.

lower short-term interest rates

If the FOMC orders the trading desk to sell Treasury securities:

the money supply curve will shift to the left and the equilibrium interest rates will rise.

The primary current debate with regard to monetary policy is __________.

the timing on withdrawing the monetary stimulus.