Exam 14: Macroeconomic Policy: Challenges in a Global Economy

Use the following to answer questions Figure: Determining Long Run and Short Run Economic Shifts -(Figure: Determining Long Run and Short Run Economic Shifts)Starting at point r,the economy will move to ____ in the long run if policymakers successfully increase aggregate demand.

Stagflation is the simultaneous occurrence of ______ unemployment and ______ inflation.

Increased globalization makes the practice of fiscal and monetary policy easier.

According to the rational expectations theory,if the Fed announces that it is going to decrease the money supply,output:

One can understand the debt obligations stemming from health care and Social Security by looking at current deficit statistics.

The possible consequences of using fiscal and monetary policies to reduce unemployment are higher debt and the risk of inflation.

The risk of highly leveraged investments is that a small decrease in price can amplify one's losses.

A shortcoming of the rational expectations hypothesis is that:

The graph that shows the tradeoff between inflation and money wages is called the:

How did an increase in mortgage defaults in 2007 affect the collateralized debt obligation (CDO)market? How did this affect AIG?

Statements by members of the Federal Reserve Board of Governors indicate a desire to boost economic growth by increasing the money supply.If unions form expectations rationally,then they will:

The Phillips curve of the 1960s for the United States:

Because recent legislation has slowed the rise in health care costs,the overall cost of Medicare has become sustainable in the long term.

The efficiency wage theory states that by paying their employees more than the market-clearing wage,employers hope to:

According to the equation for the Phillips curve,inflation is zero when the increase in nominal wages is ________ the rate of increase in labor productivity.

Which factor would enhance the government's ability to keep deficits and the national debt under control over the long term?

Use the following to answer questions Figure: Understanding Expectation Theories -(Figure: Understanding Expectation Theories)Assume the economy is at point c.According to the theory of adaptive expectations,if the Fed announces and then implements a contractionary policy,the economy will move from point c:

Most economists agree that expansionary fiscal policy is not effective in addressing a jobless recovery.

Rational expectations theory suggests that the Fed and other policymakers must fool the public if their policies are to have short-term effects.

Workers,when asking for wage increases: