Question 1

Does an increase in the rate of inflation always imply that aggregate demand is increasing? Explain.

Accepted Answer

No, not always.While rightward shifts in

Question 2

During the Great Moderation experienced in the United States during the 1990s the volatility of inflation and growth:

Accepted Answer

A) moved in opposite directions. 
B) both dropped significantly. 
C) both increased but only slightly. 
D) disappeared. 
A) moved in opposite directions. 
B) both dropped significantly. 
C) both increased but only slightly. 
D) disappeared.

Question 3

Fiscal policy suffers from the problem of:

Accepted Answer

A) being formulated and implemented by politicians subject to short-run incentives. 
B) being slow to implement. 
C) being influenced by special interest groups. 
D) all of the answers given are correct. 
A) being formulated and implemented by politicians subject to short-run incentives. 
B) being slow to implement. 
C) being influenced by special interest groups. 
D) all of the answers given are correct.

Question 4

The dynamic aggregate demand curve shifts as a result of:

Accepted Answer

A) discretionary fiscal policy. 
B) automatic fiscal policy. 
C) either discretionary or automatic fiscal policy. 
D) fiscal policy but only when it's used in conjunction with monetary policy. 
A) discretionary fiscal policy. 
B) automatic fiscal policy. 
C) either discretionary or automatic fiscal policy. 
D) fiscal policy but only when it's used in conjunction with monetary policy.

Question 5

Almost all recessions identified by the NBER are characterized by:

Accepted Answer

A) declining real GDP. 
B) higher interest rates. 
C) durations exceeding two years. 
D) higher rates of inflation. 
A) declining real GDP. 
B) higher interest rates. 
C) durations exceeding two years. 
D) higher rates of inflation.

Question 6

Possible explanations that have been offered for the Great Moderation experienced in the United States include all of the following except:

Accepted Answer

A) good fortune. 
B) economies that have become more flexible in absorbing shocks. 
C) calm financial markets. 
D) better understanding and use of monetary policy. 
A) good fortune. 
B) economies that have become more flexible in absorbing shocks. 
C) calm financial markets. 
D) better understanding and use of monetary policy.

Question 7

Discuss the short-and long-run output responses resulting from an increase in money growth when the economy is producing a current level of output that equals potential output, all other factors constant.

Accepted Answer

In the short run, an increase in money g

Question 8

Why can monetary policymakers neutralize demand shocks but not supply shocks?

Accepted Answer

Monetary policy is enacted through shift

Question 9

When faced with negative supply shocks, policymakers:

Accepted Answer

A) will stabilize both inflation and output. 
B) will always focus on stabilizing output. 
C) cannot stabilize output so they tend to focus on inflation. 
D) face a trade-off because they cannot simultaneously stabilize both output and inflation. 
A) will stabilize both inflation and output. 
B) will always focus on stabilizing output. 
C) cannot stabilize output so they tend to focus on inflation. 
D) face a trade-off because they cannot simultaneously stabilize both output and inflation.

Question 10

Central bankers with a relatively steep monetary policy reaction curve will:

Accepted Answer

A) move interest rates more aggressively when inflation rises, leading to more volatility in output. 
B) move interest rates more aggressively when inflation rises, leading to less volatility in output. 
C) move interest rates less aggressively when inflation rises, leading to more volatility in output. 
D) move interest rates less aggressively when inflation rises, leading to less volatility in output. 
A) move interest rates more aggressively when inflation rises, leading to more volatility in output. 
B) move interest rates more aggressively when inflation rises, leading to less volatility in output. 
C) move interest rates less aggressively when inflation rises, leading to more volatility in output. 
D) move interest rates less aggressively when inflation rises, leading to less volatility in output.

Question 11

In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:

Accepted Answer

A) it takes time for policymakers to recognize that shifts have occurred. 
B) changes in interest rates do not have an immediate impact on the economy. 
C) changes in consumer or business confidence can be very difficult to recognize as they are occurring. 
D) all of the answers given are correct. 
A) it takes time for policymakers to recognize that shifts have occurred. 
B) changes in interest rates do not have an immediate impact on the economy. 
C) changes in consumer or business confidence can be very difficult to recognize as they are occurring. 
D) all of the answers given are correct.

Question 12

Describe a scenario where a negative supply shock (that raises the rate of inflation) results in a permanently higher rate of inflation.

Accepted Answer

If there is an increase in the price of

Question 13

If the economy's output response to changes in current inflation is small, the slope of the dynamic aggregate demand curve will be:

Accepted Answer

A) flat. 
B) steep. 
C) positive. 
D) zero. 
A) flat. 
B) steep. 
C) positive. 
D) zero.

Question 14

What is meant by saying that automatic fiscal policy is countercyclical?

Accepted Answer

Automatic fiscal policy includes unemplo

Question 15

A "shock" is something that creates a shift in:

Accepted Answer

A) the demand curve only. 
B) the supply curve only. 
C) either the demand curve or the supply curve. 
D) both the demand curve and the supply curve at the same time. 
A) the demand curve only. 
B) the supply curve only. 
C) either the demand curve or the supply curve. 
D) both the demand curve and the supply curve at the same time.

Does an increase in the rate of inflation always imply that aggregate demand is increasing? Explain.

During the Great Moderation experienced in the United States during the 1990s the volatility of inflation and growth:

Fiscal policy suffers from the problem of:

The dynamic aggregate demand curve shifts as a result of:

Almost all recessions identified by the NBER are characterized by:

Possible explanations that have been offered for the Great Moderation experienced in the United States include all of the following except:

Discuss the short-and long-run output responses resulting from an increase in money growth when the economy is producing a current level of output that equals potential output, all other factors constant.

Why can monetary policymakers neutralize demand shocks but not supply shocks?

When faced with negative supply shocks, policymakers:

Central bankers with a relatively steep monetary policy reaction curve will:

In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:

Describe a scenario where a negative supply shock (that raises the rate of inflation) results in a permanently higher rate of inflation.

If the economy's output response to changes in current inflation is small, the slope of the dynamic aggregate demand curve will be:

What is meant by saying that automatic fiscal policy is countercyclical?

A "shock" is something that creates a shift in:

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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Exam 22: Understanding Business Cycle Fluctuations

Does an increase in the rate of inflation always imply that aggregate demand is increasing? Explain.

During the Great Moderation experienced in the United States during the 1990s the volatility of inflation and growth:

Fiscal policy suffers from the problem of:

The dynamic aggregate demand curve shifts as a result of:

Almost all recessions identified by the NBER are characterized by:

Possible explanations that have been offered for the Great Moderation experienced in the United States include all of the following except:

Discuss the short-and long-run output responses resulting from an increase in money growth when the economy is producing a current level of output that equals potential output, all other factors constant.

Why can monetary policymakers neutralize demand shocks but not supply shocks?

When faced with negative supply shocks, policymakers:

Central bankers with a relatively steep monetary policy reaction curve will:

In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:

Describe a scenario where a negative supply shock (that raises the rate of inflation) results in a permanently higher rate of inflation.

If the economy's output response to changes in current inflation is small, the slope of the dynamic aggregate demand curve will be:

What is meant by saying that automatic fiscal policy is countercyclical?

A "shock" is something that creates a shift in:

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

Filters