Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Subprime mortgages are home loans to high-quality borrowers at rates 0.25% below the prime rate.

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PC_a?

Which of these was NOT a factor leading to the financial crisis of 2007-2009?

Medicare payments rise with the rate of inflation.

As inflationary expectations rise, the _____ Phillips curve shifts to the _____.

Which of these is a financial institution that sold credit default swaps insuring investors against securities defaults prior to the financial crisis in 2008?

One major conclusion of the rational expectations theory is that:

The American Recovery and Reinvestment Act, signed into law in February 2009, was designed to shift aggregate:

Adjustable-rate mortgages are attractive to many homebuyers because these mortgages start out with a _____ interest rate and then _____ in later years.

Monetizing the debt intensifies the burden of existing debt.

If wages increase 4% faster than productivity, inflation will be 3% higher, because wages account for 75% of the total costs for a firm.

Which of these is(are) true? I. The 18-month economic downturn that lasted from December 2007 to July 2009 was dubbed the Great Depression. II) The economic recovery that took place after the 2007-2009 economic downturn was slow, requiring many years for economic indicators to return to their prerecession levels. III) The housing boom of 2003 to 2007 did not contribute to the 2007-2009 economic downturn.

The graph that shows the tradeoff between inflation and money wages is called the:

If the economy is in a jobless recovery, output grows with little growth in employment.

(Figure: Understanding Economic Shifts) The graph depicts:

If policymakers use expansionary measures to reduce unemployment below its natural rate, the economy will endure decelerating inflation.

One implication of the long-run Phillips curve is that:

Which of these is(are) true? I. People on fixed incomes will not be hurt if the United States monetizes its debt. II) If the cost of Medicare changes as health care costs increase, it would enhance the government's ability to keep deficits and the national debt under control over the long term. III) If the United States monetizes its debt, it will result in a weaker dollar if foreigners hold fewer U.S. dollars.

Adaptive expectations are driven by emotions.

The natural rate of unemployment occurs when the rate of increase in the wage is greater than the increase in productivity.