Econ Final
A Euro depreciation causes the Phillips Curve in the US to shift upward.
F
A fall in real interest rates causes a shift right of the IS curve.
F
A recession is over when the economy's real GDP reaches levels prior to the start of the recession.
F
An output gap of -1.5% and inflation at 1% would result in a fed funds rate of 1% if the Fed believed the neutral real interest rate was 2%.
F
Compared to monetary policy, fiscal policy is more effective and easier to time properly.
F
Currently the Fed does not pay interest on excess reserves.
F
Currently, government debt as a percentage of GDP is at an all time high.
F
A decrease in the Fed funds rate will cause the dollar to depreciate.
T
A dramatic and severe reduction in the national debt through reduced government would cause actual inflation to fall.
T
One argument in your text supporting deficit spending is that there is no natural timing of when government projects like roads and infrastructure spending are needed and when the government raises the funds to pay for these projects.
T
Reserves are deposits held at the Fed or cash in the vault at banks used to make payments to other banks.
T
The Fed's inflation target is 2%.
T
In the IS-MP-Fed model, a rise in the fed funds rate will cause the output gap to become more positive and inflation to rise.
確認（F)
If an economy has a negative output gap of 3%, this means the economy is shrinking by 3%.
F
If the S&P 500 rises quickly in a month, this causes wealth to increase.
T
examples of automatic stabilizers in the economy are social security payments made to retirees.
F
An economy's potential output level is the output when everyone has a job
Fales
When the economy is in recession, unemployment and inflation usually rise
False
A wage-price spiral is a cycle in which higher prices lead to higher wages, which lead to higher prices.
T
Among the 10 indicators listed in your text, to get a gauge of the conditions in the labor market, it's best to look at changes in non-farm payroll and the unemployment rate.
T
Balanced budgets would make a recessions worse.
T
Based on Okun's rule of thumb, if you forecast that the output gap will decline from -2% to -4%, the unemployment rate will rise by 1%.
T
Because there is a reserve requirement, a short term lending market for overnight loans exists called the fed funds market
T
Business cycles cause deficits because tax revenues decline sharply during recessions.
T
Countercyclical fiscal policy would require lowering taxes when the economy is in recession.
T
In the IS-MP-Fed model, a sudden decrease in business confidence will cause unexpected inflation to fall.
T
In the IS-MP-Fed model, an sudden and unexpected fall in nominal wages will cause inflation to fall.
T
As a percent of GDP, government spending in the US is among the highest in developed nations.
F
Business cycles occur regularly about every 6-8 years.
F
By offering failing banks loans during a financial crisis, the Fed encourages less financial risk-taking.
F
During the current COVID-19 induced recession, Congress extended unemployment insurance and added up to $600 per month to the program for a few months. This required new legislation. This was an example of how automatic stabilizers help smooth the business cycle.
F
Fed actions can shift the IS curve.
F
Higher interest rates cause the U.S. dollar to depreciate and net exports to rise.
F
If Y < AE, the economy has surpassed potential GDP
F
If Y > AE managers will respond by ramping up production.
F
If expected inflation is 3% and actual inflation is 4.2%, then unexpected inflation is 7.2%.
F
If retail sales rise by 3% this quarter, that is a sign of a booming economy.
F
The Fed's main tool in conducting monetary policy is to change the reserve requirement banks face.
F
The income tax system is progressive for incomes above $250,000 and regressive for incomes below $250,000.
F
The part of the Fed that conducts monetary policy is called the Board of Governors.
F
When output falls below potential output, the Phillips curve shifts left.
F
Congress passes legislation to reduce taxes. In the IS-MP model, this causes the output gap to become more positive and IS curve to shift right.
T
Debt and deficits can cause slower economic growth.
T
During an economic expansion, tax revenues will rise and deficits will fall.
T
Fiscal Policy refers to spending and tax changes that attempt to stabilize the economy.
T
Fiscal stimulus should be target towards groups with a high marginal propensity to consume and be temporary.
T
Higher interest rates cause investment and consumption to fall, causing the output gap to become more negative.
T
If government spending is permanently increased, consumption and investment would fall.
T
It is better to evaluate spending and debt as a fraction of GDP rather than looking at the level of debt or spending.
T
Suppose that the Federal Reserve has recently cut interest rates in the economy and there is a credible forecast that the Fed will again cut interest rates in the future. A manager who is IS-MP savvy will expect that GDP in the economy will rise and sales will increase in the future.
T
The classical dichotomy means that purely nominal variables won't affect real variables in the long run.
T
The majority of state spending is for programs like unemployment and income support.
T
The neutral real interest rates is the interest rate that creates a zero percent output gap.
T
The reason the Fed sets and inflation target is to shape inflation expectations in the economy. When people believe inflation will be low and stable, then price increases will be small, ensuring that inflation does in fact remain low and stable.
T
The risk premium is set by the private banking sector.
T
There is no long run trade-off between inflation and output because there is a self-fulfilling prophecy of higher inflation expectations leading to higher inflation.
T
Y = C + I + G + (X - M) describes a macroeconomic equilibrium in an open economy.
T
In the floor framework, the Fed lowers interest rates by paying more interest on reserves.
F
Lower interest rates increase the government's debt repayments, and so the government has to spend more money to match the debt.
F
Most of Federal spending is to pay for the military and national defense.
F
Most of the government debt is owed to foreigners.
F
Most of what Congress spends taxpayer dollars on is called discretionary spending.
F
Quantitative easing occurs when the Fed buys short term bonds to affect longer term interest rates.
F
Recessions usually last longer than expansions.
F
The Fed can raise interest rates by engaging in a repurchase agreement to buy bonds from banks.
F
The Fed has a Dual Mandate to increase economic activity and to lower unemployment.
F
When unexpected inflation is zero, the corresponding unemployment rate is not zero because the output gap is negative.
F
If you see a newspaper headline that says "Oil prices rise sharply," this is an example of spending shock.
F
In order for inflation to rise, costs have to go up or demand has to increase.
F
If the economy were to go into a severe recession, the Fed policy response would be to raise nominal interest rates.
F
If government spending rises by $62 billion and GDP rises by $110 billion, then the multiplier in the economy is approximately 1.77.
T
If the Fed sets a zero percent inflation target, unemployment during recessions would be higher than if it set a 2% target.
T
If the local cookie factory purchases a new energy efficient industrial oven, this expenditure is planned expenditure.
T
If the nominal rate of interest is 4.8%, the rate of inflation is 2%, and the risk premium is 0.75%, the MP curve is at 2.8%.
T
If the real rate of interest is 3.7% and the risk-free rate is 2%, the risk premium is 1.7%.
T
If you see a newspaper headline that says "Banks shut doors — depositors scrambling to get their money back," this is an example of financial shock.
T
In order to achieve its inflation target, the Fed adjusts the nominal fed funds rate.
T
In the IS-MP model, the risk-free interest rate is the rate for short term loans offered by the Fed.
T
When a supply shock causes higher inflation but also causes output to fall, then the economy experiences stagflation.
T
