Econ 029 Chapter 21

Everything else held​ constant, a decrease in autonomous consumer spending will cause the IS curve to shift to the​ ________ and aggregate demand will​ ________. A. ​right; decrease B. ​left; decrease C. ​left; increase D. ​right; increase

B

Everything else held​ constant, an increase in government spending will cause​ ________. A. the quantity of aggregate demand to increase B. aggregate demand to increase C. the quantity of aggregate demand to decrease D. aggregate demand to decrease

B

How does an autonomous tightening or easing of monetary policy by the Fed affect the MP​ curve? A. When the Fed decides to lower the real interest rate at any given inflation​ rate, the MP curve shifts upward. Monetary policy​ easing, a decision to raise the real interest rate at any given inflation​ rate, shifts the MP curve downward. B. When the Fed decides to raise the real interest rate at any given inflation​ rate, the MP curve shifts upward. Monetary policy​ easing, a decision to lower the real interest rate at any given inflation​ rate, shifts the MP curve downward. C. When the Fed decides to raise the real interest rate at any given inflation​ rate, the MP curve shifts downward. Monetary policy​ easing, a decision to lower the real interest rate at any given inflation​ rate, shifts the MP curve upward. D. None of the above are correct.

B

How is an autonomous tightening or easing of monetary policy different than a change in the real interest rate due to a change in the current inflation​ rate? A. Tightening or easing of monetary policy may cause a change in the responsiveness of the real interest rate to the inflation​ rate, not in its autonomous component. B. With a tightening or easing of monetary​ policy, some projected changes in monetary policy independent of the current inflation rate may occur. C. Tightening or easing of monetary policy is reflected as a movement along the monetary curve rather than an upward or downward shift of the curve. D. Autonomous tightening or easing of monetary policy is based on a change in the nominal interest​ rate, not the real interest rate.

B

Any factor that shifts the​ __________ curve shifts the​ __________ curve in the​ __________ direction. A. ​MP; IS; same B. ​IS; AD; same C. ​IS; AD; opposite D. ​MP; IS; opposite Suppose that taxes are decreased and the central bank conducts an autonomous easing of monetary policy. What will be the​ result? A. The IS curve shifts​ left, the MP curve shifts​ up, and the AD curve shifts left . B. The IS curve shifts​ right, the MP curve shifts​ down, and the AD curve shifts right. C. The IS curve shifts​ right, the MP curve shifts​ up, and there is an ambiguous effect on the AD curve. D. The IS curve shifts​ left, the MP curve shifts​ down, and the AD curve shifts right. Which of the following represents a movement along a given AD​ curve? A. Inflation​ increases, the real interest rate​ increases, and aggregate output increases. B. Inflation​ decreases, the real interest rate​ decreases, and aggregate output increases. C. Inflation​ decreases, the real interest rate​ decreases, and aggregate output decreases. D. Inflation​ increases, the real interest rate​ decreases, and aggregate output increases.

B B B

Suppose that a new Fed chair is​ appointed, and his or her approach to monetary policy can be summarized by the following​ statement: "I care only about increasing​ employment; inflation has been at very low levels for quite some​ time; my priority is to ease monetary policy to promote​ employment." How would you expect the monetary policy curve to be​ affected, if at​ all? A. The MP curve will shift upward because decreasing unemployment results in a tightening of monetary policy. B. The MP curve will shift downward because decreasing unemployment results in a loosening of monetary policy. C. The MP curve will shift downward because decreasing unemployment results in a tightening of monetary policy. D. The MP curve will shift upward because decreasing unemployment results in a loosening of monetary policy. What would be the effect on the aggregate demand​ curve? A. The AD curve will shift to the left. B. The slope of the AD curve will increase. C. The AD curve will not change. D. The AD curve will shift to the right.

B D

Describe how​ (if at​ all) the IS​ curve, MP​ curve, and AD curve are affected in the following ​situation : There is a decrease in autonomous consumption. A. There is a movement along the MP curve comma which decreases the real interest rate comma and the IS and AD curves shift to the right. B. All the curves shift to the left, and the IS curve becomes steeper. nbsp C. The IS and AD curves shift to the left, and the MP curve does not shift. D. The MP curve is not affected comma the IS curve becomes steeper, and the AD curve shifts to the left. E. The IS and AD curves shift to the right, and the slope of the MP curve becomes steeper.

C

How do changes in planned expenditures affect the aggregate demand​ curve? A. The aggregate demand curve shifts to the right if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, government​ purchases, or taxes decrease. B. The aggregate demand curve shifts to the left if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, or government purchases​ increase, or if taxes decrease. C. The aggregate demand curve shifts to the right if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, or government purchases​ increase, or if taxes decrease. D. The aggregate demand curve shifts to the right if autonomous​ consumption, autonomous​ investment, autonomous net​ exports, government​ purchases, or taxes increase.

C

When the financial crisis started in August​ 2007, inflation was rising and the Fed began an aggressive easing lowering of the federal funds​ rate, which indicated that A. there was a downward movement along the monetary policy curve. B. the monetary policy curve shifted upward. C. the monetary policy curve shifted downward. D. there was an upward movement along the monetary policy curve.

C

The MP curve gives the relationship between the A. nominal interest rate and aggregate output. B. nominal interest rate and the inflation rate. C. real interest rate and the inflation rate. D. real interest rate and aggregate output. A movement to the right along a given MP curve means A. expected future inflation has increased. B. an autonomous policy tightening has occurred. C. inflation is increasing. D. the federal funds rate is held constant.

C C

Which of the following causes the MP curve to shift​ down? A. an autonomous tightening of monetary policy B. an increase in inflation C. an autonomous easing of monetary policy D. a decrease in inflation When r overbar increases​, this causes a movement along​ the________ curve, and shifts the ​_________ curve. A. ​AD; MP B. ​MP; AD C. ​IS; AD D. ​MP; IS

C C

The Taylor principle A. implies the IS curve is downward sloping. B. leads to higher real interest rates when inflation decreases. C. holds when lambda greater than 0. D. leads a raise of the nominal interest rate equal to the rise in inflation. The MP curve is ______ sloping due to the Taylor principle.

C Upward

Everything else held​ constant, an appreciation of the domestic currency will cause the IS curve to shift to the​ ________ and aggregate demand will​ ________. A. ​right; decrease B. ​right; increase C. ​left; increase D. ​left; decrease

D

Why is it necessary for the MP curve to have an upward​ slope? A. If the MP curve has an upward​ slope, then more liquidity will occur in the banking system. B. An​ upward-sloping MP curve encourages consumer and business spending. C. If the MP curve has an upward​ slope, it indicates an increase in output and a decrease in unemployment. D. An​ upward-sloping MP curve keeps inflation from spinning out of control.

D