Quiz (13, 16,17)

In A​, the output gap is positive​ (an inflationary​ gap) and the core inflation rate is 3 percent a year. In B​, the output gap is negative​ (a recessionary​ gap) and the core inflation rate is 1 percent a year. The Fed is likely to have the higher federal funds rate target in situation​ ______ because​ ______.

A​; a higher federal funds rate decreases the inflationary gap and lowers core inflation

Japanese economy was below full employment: A policy to restore full employment might​ ______. This policy would create inflation if​ ______.

cut, increase government​ expenditures, or increase the quantity of money the demand stimulation was so strong it moved real GDP above potential GDP

When the Mexican government relaxes its environmental standards comma so that factories are no longer required relaxes its environmental standards, so that factories are no longer required to upgrade their production​ facilities, investment in Mexico decreases and​ Mexico's aggregate demand​ ______.

decreases. The AD curve shifts leftward.

Macroeconomic equilibrium occurs when the quantity of real GDP​ ______ equals the quantity of​ ______.

demanded; real GDP supplied

Explain the effect of the following events on​ India's aggregate supply or the quantity of real GDP supplied. In the short​ run, when U.S. firms moved their IT and data functions to​ India, India's aggregate supply​ ______. In the short​ run, when fuel prices rose ​India's aggregate supply​ ______. In the short​ run, when the price level in India increased​ India's aggregate supply​ ______.

increased decreased didn't change, but the quantity of real GDP supplied increased

Mexico trades with the United States. When the United States experiences strong (negative) economic​ growth, Mexico's aggregate demand​ ______.

increases because its exports to the United States increase. ​Mexico's AD curve shifts rightward (decrease; AD shifts left)

Suppose that the U.S. government increases its expenditure on highways and bridges by​ $100 billion. As a result of this​ expenditure, aggregate demand​ ______. If the economy is in a​ recession, real GDP​ _______.

increases by more than​ $100 billion because consumption expenditure increases in a multiplier​ process; increases

U.S. national debt​ ______ when the federal​ government's ______.

increases; outlays exceed tax revenue

If the government of Mexico cuts income​ taxes, Mexico's aggregate demand​ ______.

increases​, and the aggregate demand curve shifts rightward

The United States is experiencing low inflation and real GDP is less than potential GDP. Describe the​ Fed's actions that will restore full employment ( high inflation and real GDP is greater than potential GDP. ) The New York Fed conducts an open market​ ______ to hit the new​ ______ federal funds rate target The supply of reserves​ ______. The supply of money​ ______. Interest rate... The supply of loanable funds​ ______ and the​ long-term interest rate​ ______. Investment _______​, and aggregate demand ________ with a multiplier effect

purchase; lower increases; increases falls (sale; higher;​ decreases; decreases; rises) increases; falls increases; increases (decreases; rises;​ decreases; decreases)

The​ Fed's monetary policy instrument is​ ______. The level at which the Fed sets its monetary policy instrument is influenced by​ ______.

the federal funds rate the output gap and the inflation rate