Question 1

If the current rate of inflation is 1 percent,using the values suggested by Professor Taylor,  
,the Taylor rule predicts a federal funds rate of:

Accepted Answer

A) 0 percent. 
B) 1.5 percent. 
C) 1 percent. 
D) 0.5 percent. 
E) 3.5 percent. 
A) 0 percent. 
B) 1.5 percent. 
C) 1 percent. 
D) 0.5 percent. 
E) 3.5 percent.

Question 2

According to the Taylor rule,the federal funds rate should rise in positive proportion to the inflation rise.

Accepted Answer

A) True 
 B)False

Question 3

-Consider Figure 13.5.If the Fed sets a lower inflation target,under rational expectations,the economy moves from point __________ to point __________.

Accepted Answer

A) c;a instantly 
B) a;c slowly 
C) c;d instantly 
D) c;b slowly 
E) b;a instantly 
A) c;a instantly 
B) a;c slowly 
C) c;d instantly 
D) c;b slowly 
E) b;a instantly

Question 4

On the aggregate demand curve,if the rate of inflation rises,short-term output will rise as the curve shifts right.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following best describes why the aggregate demand curve slopes downward?

Accepted Answer

A) If the central bank observes a high rate of inflation,the monetary policy rule dictates an increase in the real interest rate.The high interest rate reduces output by reducing investment demand in the economy. 
B) If the central bank observes a low rate of inflation,the monetary policy rule dictates an increase in the real interest rate.The high interest rate reduces output by reducing investment demand in the economy. 
C) If the central bank observes a high rate of inflation,the monetary policy rule dictates a decrease in the real interest rate.The low interest rate increases output by reducing investment demand in the economy. 
D) If the central bank observes a low rate of inflation,the monetary policy rule dictates a decrease in the real interest rate.The low interest rate reduces output by reducing investment demand in the economy. 
E) None of the above is correct. 
A) If the central bank observes a high rate of inflation,the monetary policy rule dictates an increase in the real interest rate.The high interest rate reduces output by reducing investment demand in the economy. 
B) If the central bank observes a low rate of inflation,the monetary policy rule dictates an increase in the real interest rate.The high interest rate reduces output by reducing investment demand in the economy. 
C) If the central bank observes a high rate of inflation,the monetary policy rule dictates a decrease in the real interest rate.The low interest rate increases output by reducing investment demand in the economy. 
D) If the central bank observes a low rate of inflation,the monetary policy rule dictates a decrease in the real interest rate.The low interest rate reduces output by reducing investment demand in the economy. 
E) None of the above is correct.

Question 6

The effects of 9/11 were a leftward shift in the AD curve and inflation;short-run output fell along the AS curve.

Accepted Answer

A) True 
 B)False

Question 7

-Use the aggregate supply/aggregate demand model in Figure 13.4 to answer the following scenario.In the 1990s,Japan experienced a prolonged sluggish economy.If the Bank of Japan targeted inflation,it would have responded to this situation by __________,pushing the economy from point __________ to point __________;eventually the economy would have returned to the steady state at point __________.

Accepted Answer

A) raising the inflation target rate;a;b;c 
B) lowering the inflation target rate;a;b;c 
C) raising the inflation target rate;a;d;c 
D) lowering the inflation target rate;c;d;a 
E) Not enough information is given. 
A) raising the inflation target rate;a;b;c 
B) lowering the inflation target rate;a;b;c 
C) raising the inflation target rate;a;d;c 
D) lowering the inflation target rate;c;d;a 
E) Not enough information is given.

Question 8

An increase in the inflation target would shift the AD to the left.

Accepted Answer

A) True 
 B)False

Question 9

An increase in military spending will cause the AD curve to shift to the right.

Accepted Answer

A) True 
 B)False

Question 10

In the simple monetary policy rule  
,  
Measures:

Accepted Answer

A) the marginal product of capital. 
B) the deviation of the inflation rate from the target rate. 
C) how sensitive monetary policy is to changes in inflation. 
D) the target rate of inflation. 
E) none of the above 
A) the marginal product of capital. 
B) the deviation of the inflation rate from the target rate. 
C) how sensitive monetary policy is to changes in inflation. 
D) the target rate of inflation. 
E) none of the above

Question 11

If the current rate of inflation is 4 percent,using the values suggested by Professor Taylor,  
,the Taylor rule predicts a federal funds rate of:

Accepted Answer

A) 1 percent. 
B) 4.5 percent. 
C) 3 percent. 
D) 4 percent. 
E) 0.5 percent. 
A) 1 percent. 
B) 4.5 percent. 
C) 3 percent. 
D) 4 percent. 
E) 0.5 percent.

Question 12

-Consider Figure 13.2.Each of the aggregate demand curves pictured represents a different economy.In which economy is the central bank most concerned with inflation?

Accepted Answer

A) Economy 4 
B) Economy 1 
C) Economy 3 
D) Economy 2 
E) Not enough information is given. 
A) Economy 4 
B) Economy 1 
C) Economy 3 
D) Economy 2 
E) Not enough information is given.

Question 13

In the simple monetary policy rule,if   
,the AD curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 14

Most Fed watchers are convinced that the Fed is committed to:

Accepted Answer

A) high inflation. 
B) low and volatile inflation. 
C) low and stable inflation. 
D) a high unemployment rate. 
E) high and stable inflation. 
A) high inflation. 
B) low and volatile inflation. 
C) low and stable inflation. 
D) a high unemployment rate. 
E) high and stable inflation.

Question 15

In the short-run model,the steady state is characterized by   
and   
.

Accepted Answer

A) True 
 B)False

Question 16

On the aggregate supply curve,when short-run output deviations are equal to zero,the y-intercept is equal to:

Accepted Answer

A)    . 
B)    . 
C)    . 
D) 0. 
E)    . 
A)    . 
B)    . 
C)    . 
D) 0. 
E)    .

Question 17

The simple monetary policy rule  
Implies that:

Accepted Answer

A) if   ,the Federal Reserve should lower the interest rate. 
B) if   ,the Federal Reserve should raise the interest rate. 
C) if   ,the Federal Reserve should not change the interest rate. 
D) all of the above 
E) if   ,the interest rate is zero. 
A) if   ,the Federal Reserve should lower the interest rate. 
B) if   ,the Federal Reserve should raise the interest rate. 
C) if   ,the Federal Reserve should not change the interest rate. 
D) all of the above 
E) if   ,the interest rate is zero.

Question 18

Which of the following shifts the aggregate supply curve?

Accepted Answer

A) a change in u¯ 
B) an increase in the price of oil 
C) the current inflation rate 
D) all of the above 
E) raising the federal funds rate 
A) a change in u¯ 
B) an increase in the price of oil 
C) the current inflation rate 
D) all of the above 
E) raising the federal funds rate

Question 19

A change in which of the following parameters shifts the AD curve  
?

Accepted Answer

A)    
B)    
C)    
D)    
E) a and b 
A)    
B)    
C)    
D)    
E) a and b

Question 20

The U.S.Federal Reserve currently announces its inflation target.

Accepted Answer

A) True 
 B)False

If the current rate of inflation is 1 percent,using the values suggested by Professor Taylor, ,the Taylor rule predicts a federal funds rate of:

According to the Taylor rule,the federal funds rate should rise in positive proportion to the inflation rise.

-Consider Figure 13.5.If the Fed sets a lower inflation target,under rational expectations,the economy moves from point to point .

On the aggregate demand curve,if the rate of inflation rises,short-term output will rise as the curve shifts right.

Which of the following best describes why the aggregate demand curve slopes downward?

The effects of 9/11 were a leftward shift in the AD curve and inflation;short-run output fell along the AS curve.

An increase in the inflation target would shift the AD to the left.

An increase in military spending will cause the AD curve to shift to the right.

In the simple monetary policy rule , Measures:

If the current rate of inflation is 4 percent,using the values suggested by Professor Taylor, ,the Taylor rule predicts a federal funds rate of:

-Consider Figure 13.2.Each of the aggregate demand curves pictured represents a different economy.In which economy is the central bank most concerned with inflation?

In the simple monetary policy rule,if ,the AD curve is horizontal.

Most Fed watchers are convinced that the Fed is committed to:

In the short-run model,the steady state is characterized by and .

On the aggregate supply curve,when short-run output deviations are equal to zero,the y-intercept is equal to:

The simple monetary policy rule Implies that:

Which of the following shifts the aggregate supply curve?

A change in which of the following parameters shifts the AD curve ?

The U.S.Federal Reserve currently announces its inflation target.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 13: Stabilization Policy and the Asad Framework

If the current rate of inflation is 1 percent,using the values suggested by Professor Taylor, ,the Taylor rule predicts a federal funds rate of:

According to the Taylor rule,the federal funds rate should rise in positive proportion to the inflation rise.

-Consider Figure 13.5.If the Fed sets a lower inflation target,under rational expectations,the economy moves from point __________ to point __________.

On the aggregate demand curve,if the rate of inflation rises,short-term output will rise as the curve shifts right.

Which of the following best describes why the aggregate demand curve slopes downward?

The effects of 9/11 were a leftward shift in the AD curve and inflation;short-run output fell along the AS curve.

An increase in the inflation target would shift the AD to the left.

An increase in military spending will cause the AD curve to shift to the right.

In the simple monetary policy rule , Measures:

If the current rate of inflation is 4 percent,using the values suggested by Professor Taylor, ,the Taylor rule predicts a federal funds rate of:

-Consider Figure 13.2.Each of the aggregate demand curves pictured represents a different economy.In which economy is the central bank most concerned with inflation?

In the simple monetary policy rule,if ,the AD curve is horizontal.

Most Fed watchers are convinced that the Fed is committed to:

In the short-run model,the steady state is characterized by and .

On the aggregate supply curve,when short-run output deviations are equal to zero,the y-intercept is equal to:

The simple monetary policy rule Implies that:

Which of the following shifts the aggregate supply curve?

A change in which of the following parameters shifts the AD curve ?

The U.S.Federal Reserve currently announces its inflation target.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

-Consider Figure 13.5.If the Fed sets a lower inflation target,under rational expectations,the economy moves from point to point .