Macroeconomics Chapter 13 Quiz

Which of the following is considered a supply shock?

an increase in input costs

The Fed uses its tools to counteract:

booms and recessions

Generally, economists believe that monetary policy should focus on price stability in the _____ run and output or income in the _____ run.

long; short

Negative demand shocks to the economy can come from:

reductions in consumer demand.

Tightening monetary policy causes interest rates to ____ and aggregate ____ to _______.

rise; demand; decrease

When the housing bubble collapsed in 2007, ____ rose significantly, and the Fed ____ interest rates.

unemployment; lowered

Starting at equilibrium point d, if the cost of inputs rises, the short-run equilibrium will move to point _____, and thus real output will _____ and the price level will _____.

b; decrease; increase

In times of economic downturn the Fed will engage in ____ monetary policy by ____ bonds.

expansionary; buying

According to the Taylor rule, the lower the inflation rate, other things equal, the:

lower the federal funds target rate.

In a liquidity trap:

monetary policy is ineffective in changing income and output