Exam 14: Macroeconomic Policy

Suppose last year Moe faced a 25% marginal tax rate.This year tax rates increased and now Moe faces a 30% marginal tax rate.Moe may choose to work fewer hours this year because:

To prevent inflation from becoming permanently higher following an adverse inflation shock the Fed must ____, while to offset the effect of an increase in aggregate demand the Fed must _____.

Fiscal policy can shift:

Starting from full employment at the initial target inflation rate, if there is an adverse inflation shock, then the Federal Reserve must _____ in order to keep inflation from becoming permanently higher.

If the professional opinions of economists regarding the natural rate of unemployment vary between 4.5 and 6 percent, then when the actual rate of unemployment equals 10.5 percent:

Following an adverse inflation shock, the economy will return to potential more rapidly if:

Total taxes paid divided by total before-tax income is called the:

Policymakers'use of stabilization policy to eliminate output gaps is more appropriate when an economy self corrects very ______ and when the output gap is very ____.

Anchored inflationary expectations are people's expectations of future inflation that:

Fiscal policy includes:

All of the following are characteristics of independent central banks except:

Starting from full employment at the initial target inflation rate, if there is an adverse inflation shock, then the Federal Reserve must _____ in order to avoid a recession.

The time between when income taxes are cut and when consumption spending increases is an example of:

The second round increase in inflation following an adverse supply shock is the result of:

All of the following central banks have announced numerical targets for inflation except the:

If the rate of inflation equals zero, then the real rate of interest:

Which of the following statements about inflation targeting is true?

An argument against a central bank policy of announcing numerical inflation targets is that inflation targeting policies:

All of the following are ways to enhance central bank credibility except to:

The time between when Federal Reserve policymakers decide to close an output gap and when they act to change the fed funds rate is an example of: