Exam 13: Countercyclical Macroeconomic Policy

Countercyclical policies may be used even in expansions to slow down the growth rate of real GDP.

Barylia is hit by a recession.What will be the impact of a countercyclical policy on labor demand in Barylia if nominal wages are downwardly rigid?

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,the Fed's reserves ________ and Treasury bonds ________.

Which of the following statements is true?

Assuming all else equal,the higher the expected inflation rate is in an economy,the ________.

An increase in the bank reserves held by the Fed would ________.

Suppose the inflation rate target is zero and the long-run federal funds target is also zero.If the inflation rate is 4 percent and the output gap is ‒2 percent,the federal funds rate set by the Taylor rule is ________.

Which of the following is likely to happen if the government increases its expenditure?

If the Fed promises to conduct a(n)________ for several years,then inflationary expectations will be ________.

Scenario: The following figure shows the federal funds market. Assume that the market of reserves is in equilibrium at $500 billion in reserves and a 3 percent federal funds rate. -Refer to the scenario above.If the Fed completes an open market purchase of bonds that changes the quantity of reserves by $400 billion,then the federal funds rate will ________.

Which of the following is likely to increase the federal funds rate?

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,Bank A's total liabilities equal ________.

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.Fill in the balance sheets for Bank A and the Fed after this transaction has occurred.

An increase in taxes leads to a(n)________ in the growth rate of real GDP and a ________ shift of the labor demand curve

According to the Taylor rule,for a given inflation rate,________.

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,Bank A's reserves equal ________.

If the Fed conducts a contractionary monetary policy,________.

Which of the following is an example of discretionary fiscal policy during a recession?

Aside from pork barrel spending,what is another determinant of the effectiveness of expenditure-based policies and what concern does it raise?

If employers are provided a subsidy of $1 per hour for hiring workers,________.