Exam 21: Output, Inflation, and Monetary Policy

How would the discovery of a previously unknown large reserve of oil affect the short-run aggregate supply curve and why? What other change could have the same effect?

If most people expect the inflation rate will increase, the:

The relationship between the long-run real interest rate and potential output:

Rising domestic inflation rates can be contributing to the downward sloping dynamic aggregate demand curve through net exports because:

The FOMC targets the federal funds rate, but if they are going to alter the course of the economy they must influence the:

Which of the following statements seems to be verified by economic data?

Consumption can be sensitive to changes in the real interest rate because:

The dynamic aggregate demand curve has a negative slope for all of the following reasons except:

Use the equation of exchange to show that in the long run, inflation must equal money growth less the growth of potential output.

The self-correcting mechanism to return the economy to potential output from output gaps is the change in:

Output and inflation movements can arise from either demand or supply shifts.How can we tell them apart?

The federal government undertakes a large military buildup; the economy is at its potential level of output, all other things equal, the impact on the long-run real interest rate will be to:

Explain the changes that would cause the dynamic aggregate demand curve to shift.

What would be the impact on the monetary policy reaction curve if the Fed were to raise the target inflation rate?

If the economy is producing a level of output that is consistent with the potential output level, and government purchases increase, describe what happens in terms of the long-run real interest rate, and why, to keep the economy at its potential output level.

In the U.S., most of the recessions are the result of:

Explain why a country that has a fixed exchange rate cannot have an independent monetary policy reaction curve.

Why might it be argued that prolonged recessionary or expansionary gaps could actually affect potential output?

The aggregate demand curve shows the quantity of:

In the long run, current output will: