Eco Exam 2 Discord

The Federal Reserve consists of the Board of Governors and the---- regional reserve banks. typically,------- regional reserve bank presidents serve as voting members on the Federal Open Market Committee.

12;4

Suppose nominal spending growth is 6 percent and real output growth averages 2 percent. This implies that inflation averages---

4%

In March 2020, when many became worried about COVID-19, the Federal Reserve responded by ----the monetary base and ---- the interest it pays on reserve balances.

Increasing; decreasing

Equilibrium in the standard macroeconomic model can be described by the equation MtVt=Pt(Yt*).A nominal shock refers to an unanicipated change in-------whereas a real shock refers to an unanticipated change in------

MV; y*

The Personal Consumption Expenditures Price Index did not exceed the 2-percent trajectory plotted from January 2020 until

March 2021

To increase the monetary base, the Federal Reserve typically engages in ---- to ----- financial assets.

Open market operations; purchase

The production function in the standard macroeconomic model is Yt=Yt*+a[P, - E(Pa), where Yt denotes _----and Pt. denotes the-----

Potential Output; price level

Consider the following statements I. An inflation target anchors expectations about the future purchasing power of the dollar better than a price level target. I. Following a negative shock to nominal spending, a central bank committed to achieving its price level target will promote a fast recovery more effechvely than a central bank committed to achieving its inflation target. Ill. A price level target makes up for past mistakes, whereas an inflation target lets bygones-be-bygones.(which are true)

Statements I and Ill are trus

From April 2021 to November 2021, statements issued by the Federal Open Market Committee (FOMC) indicate that its members generally agreed inflation would be---. Beginning in December 2021, FOMC members acknowledged that---- factors were contributing to inflation.

Transitory; both supply and demand

Headline inflation includes----. Core inflation includes----

all prices in the index basket; only food and energy prices

The----view suggests that the price level will return to trend as real output recovers. The-----suggests that the price level will remain permanently elevated

constrained supply; nominal spending

Prior to May 2020, the M1 monetary aggregate consisted of

currency and checkable deposits

The monetary base (MO) consists of

currency and reserves

After May 2020, the M1 monetary aggregate consisted of

currency checkable deposits, and savings deposits

in response to an unanticipated decline in potential output, a price level targeting central bank will--- and a nominal level targeting central bank will ----

decrease the money supply; leave the money supply unchanged

The political business cycle theory suggests that the central bank might improve an incumbent's re-election odds by surprising market participants with------monetary policy ahead of the election, which makes the economy appear to be performing better than it actually is. If timed properly,------inflation will not be realized until after the election.

expansionary; higher

In the absence of a monetary policy response, an unanticipated reduction in nominal spending will cause real output and the price level to their anticipated levels. As expectations adjust,

fall below; real output will return to its initial trajectory while the price level declines to a lower trajectory

Businesses tend to overproduce when the price level is------ expected.

greater than

headline inflation was---- core inflation from January 2020 to august 2022

higher on the average than

a country experiences ---- when the price level grows more than 50% per month

hyper inflation

Which of the following is not a real shock that contributed to high inflation in 2021 and 2022.

increase in monetary base

A decrease in the currency to deposit ratio (C/D)---the money multiplier. A decrease in the reserve ratio (R/D)----the money multiplier.

increases; increases

For a given money multiplier, an increase in the monetary base ---- broader monetary aggregates like M1. For a given monetary base, an increase in the money multiplier-----broader monetary aggregates like M1,

increases; increases

When inflation is lower than expected, borrowers and employers typically

lose, while lenders and employees gain

Governments in countries tend to rely more heavily on the inflation tax.

low-income

From 1988 to 2008, the monetary base grew at a continuously compounding annual rate of 5.7 percent. From 2008 to 2014, the monetary base grew at a-----rate.

much higher

According to the Phillips curve, there is a.----- relationship between inflation and-------

negative; unemployment

From January 2008 to October 2008, the Federal Reserve sterilized its lending to financial institutions and key credit markets by.----. In October 2008, it began-----.

selling Treasuries: paying interest on reserves

The standard macroeconomic model implicitly assumes that expectations adjust----following a nominal shock and .-----following a real shock

slowly; Quickly

Under a fat money regime, the purchasing power of money is ultimately determined by------

the central bank

When inflation expectations increase, the expectations-augmented Phillips curve shifts

up

Milton Friedman and Edmund Phelps rejected the (naive) Phillips curve. They offered what has come to be known as an expectations- augmented Phillips curve, which captures the idea that-----

workers might be fooled by the central bank, but not consistently and persistently