Exam 13: Stabilization Policy and the Asad Framework

Refer to the following figure when answering Figure 13.5: AS/AD Model -Consider Figure 13.5. If the Fed sets a higher inflation target, under rational expectations, the economy moves from point ________ to point ________.

A change in which of the following parameters does NOT shift the AD curve $\tilde { Y } _ { t } = \bar { a } - \bar { b } \bar { m } \left( \pi _ { t } - \bar { \pi } \right)$ ?

In June 2013 moderate cleric Hassan Rowhani was elected president of Iran, one of the top five leading oil countries. Using the AS/AD framework, identify the shocks and determine the overall impact of the election on inflation and the output gap. Discuss the movement back to the steady state.

In the short-run model, the steady state is characterized by $\pi _ { t } = \pi _ { t - 1 } = \bar { \pi }$ and $\bar { a } = \bar { a } = 0$ .

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

In the simple monetary policy rule $R _ { t } - \bar { r } = \bar { m } \left( \pi _ { t } - \bar { \pi } \right)$ , $\bar { m }$ Measures:

On the aggregate supply curve, an increase in inflation causes ________, while a price shock causes ________.

When we raise the federal funds rate by 2 percent for every 1 percent increase in the inflation rate, this is an example of:

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 is the central bank most concerned with inflation?

Define the steady state in the AS/AD framework.

Which of the following shifts the aggregate supply curve?

The fact that any model that utilizes adaptive expectations necessarily will be misspecified is called:

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

The ultimate goal of macroeconomic policy is:

If m = 1/2 in the simple monetary rule and if inflation rises by 2 percent, interest rates should rise by 2 percent.

When the central bank pursues expansionary monetary policy and all other economic agents build this into their decision making, ________ with no economic benefit; this is called the ________ problem.

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

The simple monetary policy rule discussed in the chapter "dictates" the:

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

Central banks always use monetary rules to dictate monetary policy.