Question 1

Monetary policymakers face a tradeoff between:

Accepted Answer

A) the level of output and the rate of inflation. 
B) the volatility in output and the volatility in inflation. 
C) low unemployment and high inflation. 
D) high unemployment and low inflation. 
A) the level of output and the rate of inflation. 
B) the volatility in output and the volatility in inflation. 
C) low unemployment and high inflation. 
D) high unemployment and low inflation.

Question 2

Consider the period from 1995 to 1999.The U.S.economy:

Accepted Answer

A) experienced the great productivity slowdown. 
B) experienced increases in productivity that allowed the Fed the opportunity to raise the inflation rate. 
C) experienced increases in productivity that allowed the Fed the opportunity to let the inflation rate fall. 
D) saw its potential level of output decrease. 
A) experienced the great productivity slowdown. 
B) experienced increases in productivity that allowed the Fed the opportunity to raise the inflation rate. 
C) experienced increases in productivity that allowed the Fed the opportunity to let the inflation rate fall. 
D) saw its potential level of output decrease.

Question 3

Which of the following would be classified as a negative supply shock?

Accepted Answer

A) An increase in the price of oil 
B) An increase in government purchases 
C) An increase in export demand 
D) A decline of investor optimism 
A) An increase in the price of oil 
B) An increase in government purchases 
C) An increase in export demand 
D) A decline of investor optimism

Question 4

A reduction in the central bank's inflation target shifts the dynamic aggregate demand curve to the left resulting in:

Accepted Answer

A) lower current output and higher inflation. 
B) higher current output and higher inflation. 
C) lower current output and lower inflation. 
D) higher current output and lower inflation. 
A) lower current output and higher inflation. 
B) higher current output and higher inflation. 
C) lower current output and lower inflation. 
D) higher current output and lower inflation.

Question 5

Why could it be effectively argued that the temporary increase in inflation from the spending for the Vietnam War was made permanent by the Fed?

Accepted Answer

The increase in aggregate demand that re

Question 6

An increase in the price of oil should cause the short-run aggregate supply curve to:

Accepted Answer

A) shift to the right. 
B) become vertical. 
C) become horizontal. 
D) shift to the left. 
A) shift to the right. 
B) become vertical. 
C) become horizontal. 
D) shift to the left.

Question 7

Explain why understanding short-run fluctuations in output and inflation requires that we study shifts in dynamic aggregate demand and short-run aggregate supply.

Accepted Answer

The economy naturally moves to long-run

Question 8

Which of the following statements is most correct?

Accepted Answer

A) Policymakers can eliminate the effects of negative supply shock. 
B) Policymakers can neutralize movements in aggregate demand. 
C) Policymakers can shift the short-run aggregate supply curve. 
D) Shifts in the monetary policy reaction function used to stabilize the economy shift the short-run aggregate supply curve. 
A) Policymakers can eliminate the effects of negative supply shock. 
B) Policymakers can neutralize movements in aggregate demand. 
C) Policymakers can shift the short-run aggregate supply curve. 
D) Shifts in the monetary policy reaction function used to stabilize the economy shift the short-run aggregate supply curve.

Question 9

What is opportunistic disinflation and what provides the opportunity? Explain how the process works.

Accepted Answer

Opportunistic disinflation means that ce

Question 10

Globalization and trade:

Accepted Answer

A) reduce inflation in the short run but not in the long run. 
B) reduce inflation in the short run and in the long run. 
C) increase inflation in the short run but not in the long run. 
D) reduce inflation in the short run but increase inflation in the long run. 
A) reduce inflation in the short run but not in the long run. 
B) reduce inflation in the short run and in the long run. 
C) increase inflation in the short run but not in the long run. 
D) reduce inflation in the short run but increase inflation in the long run.

Question 11

Monetary policy has the following advantage(s) over fiscal policy:

Accepted Answer

A) it is less influenced by politics. 
B) it can be implemented faster. 
C) it can usually be fine-tuned. 
D) all of the answers given are correct. 
A) it is less influenced by politics. 
B) it can be implemented faster. 
C) it can usually be fine-tuned. 
D) all of the answers given are correct.

Question 12

An inflation shock that shifts the short-run aggregate supply curve leftward and leaves the long-run supply curve unchanged means the economy's potential level of output will:

Accepted Answer

A) increase. 
B) not change. 
C) decrease. 
D) decrease only if monetary policymakers do not respond. 
A) increase. 
B) not change. 
C) decrease. 
D) decrease only if monetary policymakers do not respond.

Question 13

An increase in aggregate demand will have the following effect on potential output:

Accepted Answer

A) potential output will increase. 
B) potential output will decrease. 
C) potential output will increase at first and then decrease. 
D) there won't be a change in potential output from an increase in aggregate demand. 
A) potential output will increase. 
B) potential output will decrease. 
C) potential output will increase at first and then decrease. 
D) there won't be a change in potential output from an increase in aggregate demand.

Question 14

Policymakers can stabilize the economy by shifting:

Accepted Answer

A) the short-run aggregate supply curve. 
B) the dynamic aggregate demand curve. 
C) the long-run aggregate supply curve. 
D) neither the short-run aggregate supply curve nor the dynamic aggregate supply curve. 
A) the short-run aggregate supply curve. 
B) the dynamic aggregate demand curve. 
C) the long-run aggregate supply curve. 
D) neither the short-run aggregate supply curve nor the dynamic aggregate supply curve.

Question 15

In recent years the discussions of the causes of recessions have focused on monetary policy and higher oil prices as the likely causes.Discuss how we can get insight into the likely cause by focusing on macroeconomic variables.

Accepted Answer

If the recession was caused by monetary

Question 16

Business cycles vary in:

Accepted Answer

A) the length of recessions only. 
B) the time between recessions only. 
C) both the length of recessions and the time between recessions. 
D) none of the answers given is correct; business cycles are by definition recurring waves that rise and fall in a periodic pattern. 
A) the length of recessions only. 
B) the time between recessions only. 
C) both the length of recessions and the time between recessions. 
D) none of the answers given is correct; business cycles are by definition recurring waves that rise and fall in a periodic pattern.

Question 17

Explain how globalization impacts inflation in both the short run and the long run.

Accepted Answer

The impact of globalization on economic

Question 18

Negative supply shocks cause shifts in:

Accepted Answer

A) only the short-run aggregate supply curve. 
B) the dynamic aggregate demand curve. 
C) the monetary policy reaction curve but only if policymakers do not change their inflation target. 
D) the short-run aggregate supply curve and, possibly, the long-run aggregate supply curve. 
A) only the short-run aggregate supply curve. 
B) the dynamic aggregate demand curve. 
C) the monetary policy reaction curve but only if policymakers do not change their inflation target. 
D) the short-run aggregate supply curve and, possibly, the long-run aggregate supply curve.

Question 19

A review of economic data suggests that:

Accepted Answer

A) expansions are shorter than recessions. 
B) business cycles are recurrent and periodic. 
C) over the last fifty years, recessions are becoming more common. 
D) recessions are shorter in duration than expansions. 
A) expansions are shorter than recessions. 
B) business cycles are recurrent and periodic. 
C) over the last fifty years, recessions are becoming more common. 
D) recessions are shorter in duration than expansions.

Question 20

If monetary policymakers respond aggressively to current inflation above the target inflation rate, the:

Accepted Answer

A) monetary policy reaction curve would be flat. 
B) dynamic aggregate demand curve would have a steep slope. 
C) monetary policy reaction curve would have a positive and steep slope. 
D) dynamic aggregate demand curve would shift rightward. 
A) monetary policy reaction curve would be flat. 
B) dynamic aggregate demand curve would have a steep slope. 
C) monetary policy reaction curve would have a positive and steep slope. 
D) dynamic aggregate demand curve would shift rightward.

Exam 22: Understanding Business Cycle Fluctuations

Monetary policymakers face a tradeoff between:

Consider the period from 1995 to 1999.The U.S.economy:

Which of the following would be classified as a negative supply shock?

A reduction in the central bank's inflation target shifts the dynamic aggregate demand curve to the left resulting in:

Why could it be effectively argued that the temporary increase in inflation from the spending for the Vietnam War was made permanent by the Fed?

An increase in the price of oil should cause the short-run aggregate supply curve to:

Explain why understanding short-run fluctuations in output and inflation requires that we study shifts in dynamic aggregate demand and short-run aggregate supply.

Which of the following statements is most correct?

What is opportunistic disinflation and what provides the opportunity? Explain how the process works.

Globalization and trade:

Monetary policy has the following advantage(s) over fiscal policy:

An inflation shock that shifts the short-run aggregate supply curve leftward and leaves the long-run supply curve unchanged means the economy's potential level of output will:

An increase in aggregate demand will have the following effect on potential output:

Policymakers can stabilize the economy by shifting:

In recent years the discussions of the causes of recessions have focused on monetary policy and higher oil prices as the likely causes.Discuss how we can get insight into the likely cause by focusing on macroeconomic variables.

Business cycles vary in:

Explain how globalization impacts inflation in both the short run and the long run.

Negative supply shocks cause shifts in:

A review of economic data suggests that:

If monetary policymakers respond aggressively to current inflation above the target inflation rate, the:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Modern Monetary Policy and the Challenges Facing Central Bankers

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