lesson 9,10,11

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

$12,000 of new money.

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

$14,000 of new money

The CARES Act and other smaller federal pandemic relief packages were the major reason that the deficit increased to approximately ___________ by October 2020.

$3 trillion

According to the updated 2019 CBO budget infographic posted on Canvas, in 2019 U.S. government outlays were approximately ___________ and the deficit was approximately _____________.

$4.4 trillion, $984 billion

Suppose the MPC is 0.60. Assume there are no crowding out or investment accelerator effects. If the government increases expenditures by $200 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $200 billion, then by how much does aggregate demand shift to the right?

$500 billion and $300 billion

Which of the following is not included in M1?

$500 in your savings account

Suppose an economy's marginal propensity to consume (MPC) is 0.6. Then

1 + MPC + MPC 2 + MPC 3 = 2.176 and, if we continued adding up terms in this geometric series, we would get closer and closer to the multiplier value of 2.5.

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

All of the above are correct

Which of the following correctly explains the crowding-out effect?

An increase in government expenditures increases the interest rate and so reduces investment spending.

Which of the following is a payroll tax

Social security tax

The Stock Market Boom of 2015Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

The expected price level rises. Bargains are struck for higher wages

Which of the following is an example of an increase in government purchases?

The government builds new roads

Government securities are also called

Treasury securities

A positive aggregate demand shock will eventually raise firms per unit costs because wages will eventually rise and operating costs may also rise.

True

Treasury securities are issued by the federal government to finance budget deficits.

True

Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Z in the long run

The short run is defined as

a period in which at least one factor of production is fixed

After every FOMC meeting,

a statement is immediately released

In the terminology of the task & computerization research, a routine task is

a task that can be automated

The Stock Market Boom of 2015Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2015. Which curve shifts and in which direction?

aggregate demand shifts right

When physical capital becomes more productive and we would expect

aggregate demand to increase

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

aggregate demand to the right

An increase in government spending initially and primarily shifts

aggregate demand to the right.

Suppose that both government purchases and taxes increased by $500 billion so that the budget deficit was unchanged. As a result,

aggregate demand would increase

Which of the following would cause stagflation?

aggregate supply shifts left

A negative aggregate demand shock in the short-run will lower

all of the above

A sharp and long-lasting rise in energy prices will, in the short run

all of the above

Fluctuations of production away from potential output are

all of the above

If the economy begins at potential output when there is a decrease in taxes, then in the short-run

all of the above

In the long run, after wages and prices have fully adjusted, monetary policy

all of the above

The reaction of output and prices to an aggregate demand shock is

an endogenous reaction

An aggregate demand shock is

an exogenous event

Which of the following would raise the price level in both the short and long run?

an increase in government expenditures

A reduction in personal income taxes increases Aggregate Demand through

an increase in personal consumption.

Which of the following shifts short-run aggregate supply left?

an increase in price expectations

When people believe that the Federal Reserve is committed to a low inflation environment, this helps to

anchor price expectations

Credit cards

are not considered money

Credit cards are

are not considered money

An open market operation INITIALLY changes the composition of the bank's

assets

Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

could be caused by a decrease in the expected price level

Following an aggregate demand shock, the economy's self-adjustment mechanism will

create price adjustments that eventually return the economy to potential output

Changes in the price of oil

created both inflation and recession in the United States in the 1970s.

The term used to describe the impact of an increase in government spending on investment spending is

crowding out

In the short-run, when the Federal Reserve lowers the federal funds interest rate

employment, production and inflation increase

If the Federal Reserve decreases the federal funds interest rate, in the short run

employment, production and prices rise

If the economy goes into a recession, the Federal Reserve could stabilize the economy by

lowering the federal funds rate which would increase investment spending and shift the aggregate demand curve to the right

The marginal propensity to consume (MPC) is defined as the fraction of

extra income that a household consumes rather than saves

In response to a rise in energy prices, eventually wages will

fall because of the initial increase in unemployment

Permanent tax cuts shift the AD curve

farther to the right than do temporary tax cuts

The Federal Reserve uses the ____________ as an intermediate target to affect its final targets of _____________ and ____________ .

federal funds interest rate, employment, inflation

If one bank lends excess reserves to another bank overnight, the rate that the borrowing bank pays is called

federal funds rate

Currently, U.S. currency is

fiat money with no intrinsic value

Suppose, as in the question above, taxes decline. Which of the following best describes the short-run supply reaction?

firms increase production because with rising prices and sticky wages, profit per unit increases. This is shown as a movement along the SRAS curve.

The Biden economic plan calls for expanded government spending on testing, PPE, and additional stimulus checks. All of these items would tend to

increase AD

An open market sale of government securities by the Federal Reserve will INITIALLY

increase banks holding of government securities and decrease its reserves

When the Federal Reserve conducts an open market purchase of $50 million, the first impact is that bank reserves

increase by $50 million

An increase in the budget deficit will tend to

increase interest rates and appreciate the exchange rate

An increase in government spending, holding taxes constant, will

increase interest rates and decrease investment spending in both the short run and the long run

. If an open market purchase of government securities increases bank excess reserves by $80 million, then initially banks will likely

increase loans by $80 million

A positive aggregate demand shock will

increase output and employment in the short run

An increase in investment spending in the long-run can

increase the capital stock and shift the long-run aggregate supply curve to the right

An open market sale of government securities by the Federal Reserve will

increase the federal funds interest rate

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

increased both the money multiplier and the money supply.

During the Great Recession, U.S. government outlays __________ and U.S. government revenues _________________.

increased, decreased

An increase in the MPC

increases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand.

When government expenditures increase, the interest rate

increases, making the change in aggregate demand smaller

Computerization and automation have led to employment polarization. Which of the following is not consistent with that employment polarization?

increasing employment in jobs of all wage and skill levels

An necessary element of Federal Reserve credibility is

independence from political pressure

Which of the following would NOT increase output in the short run?

individual income taxes increase

The new monetary policy inflation policy will aim for which of the following

inflation to average 2%

Which of the following is NOT a basic function of money

interest bearing asset

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight.

When the Federal Reserve increases the federal funds interest rate, the short-run impact of the action is

investment spending declines and the aggregate demand curve shifts to the left

Paul Volcker, the chair of the Federal Reserve during the 1980-82 recession, communicated clearly and effectively the Federal Reserve's commitment to lowering inflation. In an attempt to

manage price expectations

Large government budget deficits haven't lead to higher interest rates during the pandemic because

monetary policy acted to keep interest rates low

The recession of 1980-1982 was caused by

monetary policy shock initiated to lower inflation

It will likely take anywhere from 6-24 months for the low federal funds interest rate to fully affect spending, employment and inflation. This is indicative of

monetary policy's long impact lag

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

more than $1000

In the short-run following a positive aggregate demand shock which of the following is true

most wages have not yet adjusted

A positive aggregate demand shock will __________ production in the long run.

not change

Suppose the economy begins at potential output and there is a large increase in government spending and the Federal Reserve takes no action to influence interest rates. We could expect that this action would produce which of the following outcomes.

nterest rates increase leading to a decline of investment spending in the both the long-run and the short-run.

When the Federal Reserve lowers the federal funds interest rate, in the long run

only prices are higher

The long-run impact of an increase in government purchases is

output is unchanged, investment spending is lower and prices are higher

Which of the following describes the long-run impact of an decrease in taxes (assuming that the there is no supply side impact of the tax change)

output is unchanged, investment spending is lower and prices are higher

When the Fed conducts open-market purchases,

it buys Treasury securities, which increases the money supply.

Which of the following features of the Federal Reserve is NOT related to maintaining Federal Reserve independence

it dual mandate from Congress

By 1980, inflation was

just over 11% when measured with the regular PCE and just under 10% when measured with core PCE

In a fractional-reserve banking system, a bank

keeps only a fraction of its deposits in reserve.

If people had not believed that Paul Volcker's FOMC would maintain high interest rates until inflation fell, then the the 1980-82 recession may have been longer because

price expectations would have been slow to adjust

A negative aggregate demand shock in the long run will lower

prices

In the long-run monetary policy is neutral, meaning that the only long-run impact is on

prices

In the long-run, the only lasting impact of monetary policy is on

prices

Most economists believe that fiscal policy

primarily affects aggregate demand

When the Federal Reserve lowers the federal funds interest rate, in the short-run firms will

produce more because per unit profit is rising

Social security is primarily what kind of program

provides retirement income to those who have worked

the Fed increases reserves if it conducts open market

purchases or auctions term credit.

An increase in the federal budget deficit will tend to

raise interest rates, cause the exchange rate to appreciate and worsen the trade deficit

suppose that the economy is in a long-run equilibrium at potential output, but that inflation is over 10%. If the Federal Reserve decides to take action to lower inflation, it would

raise the federal funds interest rate to shift the AD curve to the left

Assume the MPC is 0.65. Assuming only the multiplier effect matters, a decrease in government purchases of $20 billion will shift the aggregate demand curve to the

left by about $57.1 billion.

. An open market purchase of government securities by the Federal Reserve will lead to multiple rounds of

loan and deposit expansion

What does the Fed auction at the Term-Auction Facility?

loans of a quantity it sets

The growth and inflation trends of the 1990s are consistent with which of the following

long-run supply increasing faster than aggregate demand

To lower inflation during the 1980-82 "double-dip" recession, the Federal Reserve raised the federal funds interest rate which led to

lower spending and higher unemployment

At the end of October, GDP data for the 3rd quarter were released. The data indicate that

real GDP growth increased 7.4% in the 3rd quarter relative to the 2nd quarter

Financial CrisisSuppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. Refer to Financial Crisis. What happens to the price level and real GDP in the short run?

both the price level and real GDP fall

The Stock Market Boom of 2015Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

both the price level and real GDP rise

When personal income taxes are cut, in the first round of the multiplier process

consumption increases

During the 1990s information technology boom,

the marginal product of capital increased and aggregate demand shifted to the right

Which of the following tends to make aggregate demand shift further to the right than the amount by which government expenditures increase?

the multiplier effect

The short run is defined as

the period during which prices and wages have not yet fully adjusted to a shock

The Federal Reserve does not depend on Congress for its budget and the terms of the Board of Governors are long and staggered term. These features contribute to

the political independence of the Federal Reserve

If aggregate demand shifts left, then in the short run

the price and real GDP both fall

The long-run effect of an increase in household consumption is to raise

the price level and leave real output unchanged.

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

the price level to fall and real GDP to rise.

If government spending decreases by $10 billion and personal income taxes are also cut by $10 billion, then the net effect on total spending (after the multiplier process) is that

total spending decreases

Today, bank runs are

uncommon because of FDIC deposit insurance.

Beginning at least in the 1980s,

wage inequality has increased

As price expectations decline,

wages decline, lowering the cost of production and prices. Lower prices create a movement along the aggregate demand curve leading people to spend more.

When the Federal Reserve lowers the federal funds interest rate, in the transition from the short run to the long run,

wages rise and production falls

If the Federal Reserve decreases the federal funds interest rate, as the economy transitions from the short run to the long run

wages rise and the short-run aggregate supply curve shifts up/left

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

will be able to make new loans up to a maximum of $9.50

If inflation expectations rise, even without any fundamental economic reasons, it is likely that the expectations themselves

will lead to higher prices and inflation

When the Fed makes open-market sales bank

withdrawals increase and lending decreases.

If output is above its natural rate, then according to sticky-wage theory

workers will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level.

The neutral interest rate is the federal funds interest rate that

would yield full employment

​Imagine the U.S. economy is in long-run equilibrium. Then suppose the aggregate demand increases. We would expect that in the long-run the price level would

​increase

The minimum amount of reserves that banks must hold is called

required reserves

The cash that banks keep on hand or on deposit at the Federal Reserve is called

reserves

On a bank's T-account, which are part of the bank's assets?

reserves but not deposits made by its customers

One of the economic dangers of monetary policy's impact lag, is that monetary policy may

result in the economy "overshooting" the full employment goal

Assuming no crowding-out, investment-accelerator, or multiplier effects, a $100 billion increase in government expenditures shifts aggregate demand

right by $100 billion

Stagflation exists when prices

rise and unemployment rises

An economic expansion caused by a shift in aggregate demand causes prices to

rise in the short run, and rise even more in the long run

An economic expansion caused by a shift in aggregate demand remedies itself over time as wages and the expected price level

rise, shifting short-run aggregate supply up/left.

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

rise. This rise in price expectations shifts the short-run aggregate supply curve to the left.

Higher frequency data from Open Table indicates that in the past couple of weeks reservations are trending down possibly as a result of

rising coronavirus cases

if the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

sell government securities. This selling would increase interest rates and shift the AD curve to the left.

The money supply decreases if the Fed

sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.

Refer to Figure 34-8. An increase in government purchases will

shift aggregate demand from AD1 to AD2

Refer to Figure 34-8. An increase in taxes will

shift aggregate demand from AD1 to AD3.

Tax increases

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

A positive aggregate demand shock that increases consumption spending by $50 billion will

shift the AD curve to the right by more than $50 billion

If government spending increases by $100 billion and individual income taxes increase by $100 billion so that the government budget deficit is unchanged, then the net impact of both actions is that the AD curve would

shift to the right

In the mid-1970s the price of oil rose dramatically. This

shifted aggregate supply left, the price level rose, and real GDP fell

The Federal Reserve's inflation fighting actions in 1980-82

shifted the aggregate demand curve to the left

The Stock Market Boom of 2015Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

short-run aggregate supply left.

In the short-run following a positive aggregate demand shock, some firms will raise prices because

shortages exist at the original prices

Which of the following is NOT an example of U.S. government discretionary spending?

social security

In the digging deeper slides, slide #8 shows that the CBO projected debt held by the public to rise to close to 100% of GDP by 2030. This projection was before the large expenditures for economic relief from the pandemic induced downturn. The projected deficits shown on slide #8 arise from projected expenditures for

social security and medicare expenses for future retirees.

When personal income taxes decline by $5 billion and the MPC = .8, in the first round of the spending multiplier process1

spending increases by $4 billion

When government spending increases by $5 billion and the MPC = .8, in the first round of the spending multiplier process

spending increases by $5 billion

If I deposit my paycheck in the bank today because I want to spend it next week, this is an example of which basic function of money:

store of value

Suppose that the economy begins at potential output when individual income taxes decline by $500 billion. If the MPC = .6, then which of the following occurs in the short run?

the AD curve shifts to the right by $750 billion

If government purchases increase by $250 billion and the MPC = .8, then

the AD curve will shift to the right by $1,250 billion

One of the major benefits of a Federal Reserve that is credible in its announcements to lower inflation is that

the Federal Reserve will be able to anchor inflation expectations more easily and this can make monetary policy induced recessions shorter

When the Federal Reserve lowers the federal funds interest rate, the _______ curve shifts to the _________

AD, right

The money multiplier equals

1/R, where R represents the reserve ratio for all banks in the economy.

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

25 percent.

If the reserve ratio is 12 percent, then the money multiplier is

8.3.

The Federal Reserve chair that initiated a policy of clear communication and forward guidance was

Ben Bernanke

Using the CBO budget infographic for 2019 posted on Canvas, what share of government outlays went toward Social Security and Medicare in 2019? Please round your answer to the nearest tenth and don't include the % sign. For example, if your calculation was 36.789%, then enter 36.8.

Between 36.4 and 38.4

Using the CBO budget infographic for 2019 posted on Canvas, what share of government revenue came from individual income taxes in 2019? Please round your answer to the nearest tenth and don't include the % sign. For example, if your calculation was 36.789%, then enter 36.8.

Between 47.6 and 49.6

Using the CBO budget infographic for 2019 posted on Canvas, what share of government revenue came from corporate income taxes in 2019? Please round your answer to the nearest tenth and don't include the % sign. For example, if your calculation was 36.789%, then enter 36.8.

Between 5.6 and 7.6

Which of the following is NOT a fiscal policy action

Congress passes a new law legalizing marijuana use in the United States

Which of the following is NOT a mandatory spending budget item in the U.S. government budget?

Salary payments to military troops

Which of the following is a bank liability:

Deposits

In the long-run expansionary fiscal policy is neutral

False

When the Federal Reserve conducts open market purchases of government securities, it is purchasing them directly from the Treasury.

False

Again, using the situation in the previous two questions. Which of the following best describes the mechanism that moves the economy from the short-run equilibrium to the long-run equilibrium in response to the tax decline.

In the short-run, the economy's employment level rose above full employment. This tight labor market eventually causes wages and price expectations to increase and, therefore, the SRAS curve shifts up/left.

The current chair of the Federal Reserve is

Jerome Powell

The measure of money than includes checking accounts but not savings account is * 0/1

M1

From the CBO estimates prior to the pandemic, please order the following major government budget items from largest projected increase to the smallest projected increase over the next 20 years (these projections are still likely true over the next 20 years since pandemic related expenditures will be limited to 2020 and possibly 2021).

Major health care programs You Answered2 Social Security Correct AnswerNet interest on the debt You Answered3 Net interest on the debt Correct AnswerSocial Security Correct!4 Other mandatory spending

Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1= SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

P2, Y1.

Refer to Figure 33-5. In Figure 33-5,

Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium.

Currently the federal funds interest rate is at 0%. This interest rate is

accomodative

When the Fed conducts an open market purchase,

bank reserves increase and the federal funds rate decreases

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

because unemployment is high, wages will be bid down and short-run aggregate supply will shift right.

A tax increase has

both a crowding out and multiplier effect

Following a positive aggregate demand shock, the price rise will

both of the above

The Fed's primary tool to change the money supply is

conducting open market operations.

The Brookings Institute projects that in 2020 total state and local INCOME tax revenue will __________ and total sales tax revenue will ____________.

decline by $22 billion, decline by $49 billion

When the Federal Reserve conducts an open market sale of government securities, we would expect bank reserves to ____________ and the federal funds interest rate to ____________.

decline, increase

An increase in the budget deficit can lead to exchange rate changes that will tend to

decrease exports and increase import

A $75 million open market sale of government securities by the Federal Reserve when the reserve ratio is 10%, will ___________ the money supply by ___________

decrease, $750 million

In October, the unemployment rate ________________ , labor force participation _________________ and the number of people who have been unemployed longer than 27 weeks __________________.

decreased, increased, increased

In the short-run, when the Federal Reserve increases the federal funds interest rate, aggregate demand __________ because ____________

decreases, investment spending falls,

The Federal Reserves dual final targets are

employment and inflation

Suppose the economy begins at a long-run equilibrium at potential output when the economy is hit by a negative AD shock. Which of the following best describes the short-run supply reaction to that shock.

firms produce less because the lower price level accompanied by sticky wages decreases profit per unit. This is shown by a movement along the SRAS curve.

In which case can we be sure real GDP rises in the short run?

foreign economies expand and government purchases rise.

After the FOMC's meeting ending November 5th, statement contained the following text: "The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time." The paragraph contains an example of

forward guidance

Under a fractional-reserve banking system, banks

generally lend out a majority of the funds deposited.

if the government deficit this year is $500 billion, then

government debt will increase by $500 billion

A budget deficit occurs when

government expenditures exceed tax revenue in a given year

Fiscal policy refers to the idea that aggregate demand is affected by changes in

government spending and taxes.

The graph below was copied from the Johns Hopkins Coronavirus Resource Center webpage (https://coronavirus.jhu.edu/ (Links to an external site.)) on November 17, at approximately 6pm. It shows the 10 countries with the most severe coronavirus outbreaks. Which of the lines shows the U.S. cases?

green line

fiat money

has no intrinsic value.

For nearly all years since the 1960s, the U.S. federal government

has run a budget deficit

Medicare is primarily what kind of program

health insurance program for retirees

The 1990s was a period of

high growth and declining inflation

Given the short-run financial crisis event in the above question, which of the following describes the economy's movement from the short-run to the long-run?

high unemployment eventually causes wages to decline and the short-run aggregate supply curve shifts down/right.

Candidate Biden's economic plan calls for all of the following EXCEPT

higher taxes for middle-income earners

Since 1968, the U.S. government has run a budget surplus

in the four years spanning 1998-2001

A positive aggregate demand shock will ________ prices in the long run.

increase

Over the next 10 years, the share of the U.S. population over 65 years of age will

increase

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

the MPC is small and changes in the interest rate have a large effect on investment

Recessions in Canada and Mexico would cause

the U.S. price level and real GDP to fall

Recessions in Canada and Mexico would cause which of the following short-run impacts?

the U.S. price level and real GDP to fall.

If an aggregate demand shock initially decreases investment spending by $75 billion and the MPC equals .5, then

the aggregate demand curve shifts to the left by $150 billion

If MPC = .75 and government spending increases by $10 billion

the aggregate demand curve shifts to the right by $40 billion

The Fed's control of the money supply is not precise because

the amount of money in the economy depends in part on the behavior of depositors and bankers.

The amount by which government outlays exceeds government revenue in any one year is called

the budget deficit

At the beginning of March 2020, the federal debt was approximately $17.5 trillion dollars. The Congressional Budget Office predicts that the cost of the CARES Act will be about $1.75 trillion. There are no plans to raise taxes. Without the CARES Act, the federal government was projected to run an additional $750 billion ($.75 trillion) deficit between March and the end of its fiscal year on June 30th. Using those estimates, by the end of June we would estimate

the federal debt would be about $20 trillion

The Feddral Reserve's intermediate target is

the federal funds interest rate

As a result of fiscal policy to soften the economic impact of the pandemic along with the declines in tax revenue, the monthly federal budget deficit in May 2020 was $424 billion (about double the size of the deficit in April). That means in May

the federal government borrowed $424 billion by selling Treasury securities

Suppose that the Federal Reserve took action to lower inflation as in the question above. Which of the following describes the mechanism that moves the economy from the short-run to the long-run equilibrium.

the increase in unemployment at the short-run equilibrium eventually causes wages and price expectations to decline. This lowers production costs and the SRAS curve shifts down/right.

A key economic factor driving output growth and inflation trends during the 1990s was

the information technology boom

Suppose the economy is in long-run equilibrium. If there is an increase in government purchases at the same time there is a large increase in the price of oil, then in the short-run

the price level will rise, and real GDP might rise, fall, or stay the same

The quicker that wages and price expectations adjust

the quicker will be the economy's adjust back to potential output

As price expectations fell in response to the recession induced by the Federal Reserve,

the short-run aggregate supply curve shifted down/right

When production costs rise,

the short-run aggregate supply curve shifts to the left.

When wages and price expectations rise

the short-run aggregate supply curve shifts up/left

The U.S. federal government currently has a debt level of about $19 trillion. To pay off the debt over the next 50 years would require that

the sum of government deficits and surpluses be at least $19 trillion

The economy's quick recovery from the 1980-82 recession was in part a result of all of the following EXCEPT

the unemployment rate never went too high during the recession

Since about 1980, there has been polarization of job growth. This means that

there has been high employment growth in high and low wage occupations but not in middle wage occupations

Suppose the economy begins at a long-run equilibrium at potential output when the economy is hit by a negative AD shock. Which of the following items describes the demand response to the shock as the economy moves from the short-run equilibrium to the long-run equilibrium? Please check all responses that apply

there is a movement along the AD curve

Economists use the word "money" to refer to

those assets regularly used to buy goods and service