Exam 13: Macroeconomic Policy and Aggregate Demand and Supply Analysis

Since 2010,the federal funds rate has been well below the rate suggested by the Taylor rule.A likely explanation for the discrepancy is that ________.

Every six weeks,the Federal Open Market Committee (FOMC)meets to discuss monetary policy.This discussion is mainly focused on ________.

In recent decades,the trend among central banks has been to adopt ________.

Nonconventional monetary policy attempts to reduce financial frictions by ________.

Aggregate Demand and Supply Analysis -In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.If autonomous monetary policy (alone)is used to bring output to $12 trillion,then the figure implies that the real interest rate will be ________ percent,and the inflation rate will be one percent.

Nonconventional monetary policy attempts to reduce financial frictions by ________.

Every six weeks,the Federal Open Market Committee (FOMC)meets to discuss how to best adjust ________ to accommodate shocks that shift the level of ________.

A negative shock in aggregate demand will likely result in no permanent change in ________.

Cost-push inflation is to ________ as demand-pull inflation is to ________.

A central bank with a hierarchical mandate will seek ________ as a condition of pursuing other goals.

High inflation that persists beyond the ending of expansionary policies is probably ________.

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

Activists believe that ________.

After 1975,the U.S.economy continued to experience high inflation ________.

How might long policy lags impact the divine coincidence?

What is the divine coincidence? When and why does it not hold true?

A goal of very high employment may lead to ________.

Suppose that inflation is at the target rate and output has fallen substantially below potential output.A central bank with a primary objective of price stability should ________.

"With autonomous changes in the policy interest rate,the Federal Reserve cannot determine the long run equilibrium level of the real interest rate or potential output and will only be able to determine inflation." This statement is consistent with ________.

Aggregate Demand and Supply Analysis -In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.If there is no policy intervention,then the figure implies that when output has reached $12 trillion,the real interest rate will be ________ percent,and the inflation rate will be ________ percent.