Exam 13: Stabilization Policy and the Asad Framework

Refer to the following figure when answering Figure 13.4: AS/AD Model -Use the aggregate supply/aggregate demand model in Figure 13.4 to answer the following scenario. The terrorist attacks on 9/11 caused the economy initially to move from point ________ to point ________; eventually the economy returned to the steady state at point ________.

Refer to the following figure when answering Figure 13.4: AS/AD Model -Use the aggregate supply/aggregate demand model in Figure 13.4 to answer the following scenario. Unrest in the Middle Eastern country of Syria would cause the economy to initially move from point ________ to point ________; eventually the economy would return to the steady state at point ________.

Refer to the following figure when answering Figure 13.4: AS/AD Model -Use the aggregate supply/aggregate demand model in Figure 13.4 to answer the following scenario. The terrorist attacks on 9/11 caused the economy to initially move from point ________ to point ________.

The simple monetary policy rule discussed at length in the text is:

What is the Taylor rule? How effective a tool is it?

If policymakers suffer from time inconsistency, they would be better off adopting and sticking to policy rules.

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

If the current rate of inflation is 4 percent, using the values suggested by Professor Taylor, $\bar { r } = 2 \% ; \bar { r } = 2 \% ; \bar { m } = 1 / 2 \% ,$ 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.

A policy rule that dictates what interest rates monetary policy should follow is:

Economic forecasters use the term structure of interest rates, the federal funds rate, and unemployment claims as economic indicators.

Refer to the following figure when answering Figure 13.2: AD Curve -Consider Figure 13.2. The aggregate demand curve ________ displays a relatively aggressive monetary policy, while the curve ________ displays a monetary policy completely unresponsive to changes in inflation.

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

Refer to the following figure when answering Figure 13.1: AD Curve -Consider Figure 13.1. Holding the inflation rate constant, beginning at point e, if there is an aggregate demand shock, the AD curve shifts:

Refer to the following figure when answering Figure 13.1: AD Curve -Consider Figure 13.1. Holding inflation constant, if there is a negative aggregate demand shock, the economy would move from point e to point:

Refer to the following figure when answering Figure 13.2: AD Curve -Consider Figure 13.2. Each of the aggregate demand curves pictured represents a different economy. In which economy would fighting inflation have the biggest impact on real output?

If $\bar { m } = 0.5$ in the simple monetary rule and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will:

If the United Auto Workers successfully negotiated higher wages, this would cause the AD curve to shift to the left.

Policy is conducted by discretion if policymakers:

The advantage of an explicit inflation target is that it: