Macro (quiz 14-final)
monetary policy makers are allowed almost no discretion so there is no political business cycle.
false
monetary policymakers are allowed a lot of discretion which makes it unlikely that there is a political business cycle.
false
monetary policymakers are allowed almost no discretion and so there is no political business cycle.
false
other things the same, a decrease in the price level induces people to hold less money, so they lend less, and the interest rate rises.
false
other things the same, as the price level decreases it induces greater spending on investment but not net exports.
false
other things the same, when the government spends more, the initial effect is that aggregate demand shifts left.
false
the aggregate demand curve is vertical in the long run.
false
the aggregate supply curve is upward sloping rather than vertical in neither the short nor the long run.
false
the federal reserve converts federal reserve notes into gold.
false
the marginal propensity to consume (MPC) is defined as the fraction of total income that a household consumes rather than saves.
false
the money multiplier equals 1 divided by (1-the reserve ratio)
false
the multiplier effect and the crowding-out effect both amplify the effects of an increase in government expenditures.
false
the natural rate of unemployment is constant over time.
false
the time inconsistency of policy implies that what policy makers say they will do is generally what they will do, but people don't believe them because of current policy.
false
when taxes decrease, consumption decreases, shifting aggregate supply to the right.
false
zero inflation might be dangerous because it could lead to times of deflation.
false
"leaning against the wind" is exemplified by a tax cut when there is a recession.
true
During a recession the economy experiences falling employment and income.
true
a change in the money supply changes only nominal variables in the long run.
true
a law that requires the money supply to grow by a fixed percentage each year would eliminate both the time inconsistency problem and political business cycles.
true
according to classical macroeconomic theory, in the long run monetary growth affects nominal but not real variables.
true
an increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.
true
as the price level rises people will want to buy fewer bonds, so the interest rate rises.
true
automatic stabilizers are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession.
true
banks could not change the size of the money supply if they were required to hold all deposits in reserve.
true
bottles of very fine-wine are less liquid than demand deposits.
true
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.
true
disinflation is defined as a reduction in the rate of inflation.
true
during recessions, automatic stabilizers tend to make the government's budget move toward deficit.
true
if households view a tax cut as temporary, the tax cut has less of an affect on aggregate demand than if households view it as permanent.
true
if the natural rate of unemployment falls, both the short-run and long-run Phillips curve shift left.
true
in an economy that relies on barter, trade requires a double-coincidence of wants.
true
in the long run, inflation rate depends primarily on the money supply growth rate.
true
investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
true
most economists believe that after a few years, changes in the money supply change only nominal variables, but not real variables.
true
people will spend more if real wealth rises and interest rates fall.
true
people will want to hold less money if the price level decreases or the interest rate increases.
true
proponents of zero inflation argue that a successful program to reduce inflation eventually reduces inflation expectations.
true
proponents of zero inflation argue that reducing inflation has temporary costs and permanent benefits.
true
suppose that a central bank increases the money supply. according to the logic of the Phillips curve this should make prices, output, and employment rise.
true
the fed raised interest rates in 2004 and 2005. this implies, other things the same, that the fed decreased the money supply because it was concerned about inflation.
true
the federal open market committee makes monetary policy.
true
the federal reserve primarily uses open market operations to change the money supply.
true
the federal reserve serves as a bank regulator.
true
the federal reserve was created in 1913 after a series of bank failures in 1907.
true
the time inconsistency of monetary policy means that once people have formed expectations of low inflation based on a promise by the central bank, the central bank is tempted to raise inflation to lower unemployment.
true
the wealth effect, interest rate effect, and exchange rate effect are all explanations for the slope of the aggregate demand curve.
true
ultimately, the short-run reduction in unemployment associated with an increase in inflation is due to unanticipated inflation, not inflation per se.
true
when output rises, unemployment falls.
true
when the fed buys government bonds, the reserves of the banking system increase, so the money supply increases.
true
zero inflation would limit the flexibility of the labor market and so could at times raise unemployment.
true
a decrease in the growth rate of the money supply eventually causes the short-run Phillips curve to shift right.
false
an adverse supply shock will cause output to rise and prices to fall.
false
during expansions, automatic stabilizers make government expenditures and taxes fall.
false
fiscal policy affects the economy only in the short run.
false
fiscal policy cannot be used to move the economy along the short-run Phillips curve.
false
if the fed were to increase the money supply, inflation and unemployment would both increase in the short run.
false
in the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply.
false
"leaning against the wind" is exemplified by a decrease in government expenditures when there is a recession.
false
Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.
false
Historically, the change in real GDP during recessions has been mostly a change in consumption spending.
false
M1 includes savings deposits.
false
The federal reserve is a privately operated commercial bank.
false
a decrease in expected inflation shifts the long-run Phillips curve left.
false