Exam 20: Macroeconomic Policy

When the Fed enacts monetary policy,in the short run it changes

If the economy is at potential GDP and the Fed makes an open market purchase of government securities,in the short run bank reserves ________,the nominal interest rate ________,and the aggregate demand curve ________.

If the economy is at potential GDP and the Fed makes an open market sale of government securities,in the long run the aggregate ________ curve shifts ________ and the price level ________.

If the Fed makes an open market ________ of government securities,the federal funds rate will ________ as the quantity of money ________.

If net taxes are less than government outlays,the government sector has a budget ________ and government saving ________.

The Laffer curve studies the relationship between

If the Fed is concerned with lowering ________ it will make an open market ________ of government securities,which will ________ real GDP.

A decrease in the reserves of commercial banks could be the result of

A fiscal action that is triggered by the state of the economy is called

If the Fed makes an open market ________ of government securities,the federal funds rate ________ and the immediate impact is to shift the aggregate ________ curve.

If the Fed is concerned with lowering ________ it will make an open market ________ of government securities,which will shift aggregate demand curve ________.

Fiscal policy entails changes in

An increase in taxes I. violates the Taylor rule. II) decreases real GDP. III) forces the Fed to change its instruments.

An income tax hike ________ potential GDP by ________.

An economy has real GDP of $300 billion and potential GDP of $240 billion.To move the economy to potential GDP,the government should ________ taxes and/or ________ government expenditure.

The crowding out effect refers to

A decrease in government expenditures on goods and services is an example of ________.

If we compare the United States to France,we see that potential GDP per person in France is ________ than that in the United States because the French ________ is greater than that in the United States.

The Fed's instruments include

Which of the following is true? I. The quantity theory predicts that in the long run the inflation rate equals the money growth rate minus the growth rate of potential GDP. II. If the Fed decreases the federal funds rate,aggregate demand increases. III. The Fed's monetary policy works by shifting the short-run aggregate supply curve.