Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Monetized debt is paid for by:

One cannot understand the debt obligations stemming from health care and Social Security by looking at current deficit statistics.

The Phillips curve:

(Figure: Determining Curves) The curve in the graph represents a:

Which of these was NOT a response by the government to mitigate the effects of the financial crisis?

Suppose the economy is currently in equilibrium, with unemployment equal to the natural rate, and that people form expectations rationally. If the Federal Reserve announces that it is going to decrease the money supply, then:

Monetizing debt results in the depreciation of the dollar.

(Figure: Understanding Phillips Curves) What is the expected inflation rate associated with Phillips curve PC_b?

(Figure: Determining Long-Run and Short-Run Economic Shifts) Starting at point r, the economy will move to point _____ in the long run if policymakers successfully increase aggregate demand.

Wall Street ratings firms had an incentive to give overly glowing ratings to collateralized debt obligations because the firm received a higher fee for giving higher ratings.

Who will NOT be hurt if the United States monetizes its debt?

The unemployment rate during the 2007-2009 recession was not as high as the unemployment rates in the previous two recessions.

(Figure: Understanding Expectation Theories) Assume the economy is at point c. According to the theory of adaptive expectations, if the Federal Reserve announces and then implements a contractionary policy, the economy will move from point c to point:

Milton Friedman argued that:

When the expected rate of inflation increases, the Phillips curve:

According to the equation for the Phillips curve, if wages increase by 3% and productivity increases by 5%, then inflation will be:

Which statement about adjustable-rate mortgages is true?

Robert Lucas argued that the theory of rational expectations suggests that tax cuts will work if used temporarily.

The 2007-2009 recession was caused by a(n):

Suppose the economy is currently in long-run equilibrium, with unemployment equal to the natural rate, and that people form expectations rationally. If the Federal Reserve announces that it is going to increase the money supply, then: