Chapter 16 and 17 ECON 1040 Final

Critics of stabilization policy argue that

-there is a lag between the time policy is passed and the time policy has an impact on the economy -the impact of policy may last longer than the problem it was designed to offset -policy can be a source of, instead of a cure for, economic fluctuations (All of the above)

This sequence; price level increases, demand for money increases, equilibrium interest rate increases quantity of goods and services demanded decreases, explains why the

Aggregate demand curve slopes downward

The short run relationship between inflation and unemployment is often called

The Phillips curve

When monetary and fiscal policymakers expand aggregate demand, which cost is incurred in the short run?

The price level increases more rapidly

According to the Phillips curve, policymakers would reduce inflation but raise unemployment if they

decrease MS

Suppose there is an increase in gov't spending. To stabilize output the Federal Reserve would

decrease the MS

The price of imported oil rises. If the gov't wants to stabilize output, which of the following could it do?

increase government expenditures or increase the MS

Suppose an increase in interest r8s causes rising unemployment and falling output. To counter this, the Federal Reserve would

increase the MS

If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

increasing the Money Supply, which lowers interest r8s

In the long run,

inflation depends primarily on upon the MS growth r8

If two graphs apply to an economy (like the United States), then the slope of the AD curve is primarily attributable to the

interest-r8 effect

In the short run, unemployment and inflation are

negatively related

Monetary and Fiscal Policy influence

output in the short run only

Tax increases

shift aggregate demand left while increases in government expenditures shift aggregate demand right.

In the long run, unemployment and inflation are

unrelated problems

In the graph of the Money Market, the money supply (MS) curve is

vErTiCaL. It shifts right if the Fed buys bonds

Who's gonna ace this test

you are