Exam 23: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

The money supply declines when, other things equal:

U.S.economic data from 1955 to 2000 show that both unemployment and inflation rates increased during that period.

The long-run aggregate supply curve at potential national income is analogous to:

The observed unemployment rate is less than the natural rate of unemployment if:

The change in the money supply in an economy is measured as:

In order to achieve an unemployment rate below the natural rate of unemployment, the Fed must pursue a policy of low-monetary-growth during a time when the public expects high inflation.

The business cycle that results from the election campaign of incumbent politicians is called a:

Following an unexpected decline in aggregate demand, once production cutbacks start offsetting rising inventory levels:

Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy.Which of the following will be observed?

If the Fed aims to achieve a level of unemployment below its natural rate, it must follow time-inconsistent policies.

Government spending can be financed by all of the following, except:

In the presence of Regulation Q, when interest rates rise:

A recessionary real shock is associated with an outward shift of the short-run Phillips curve and with a leftward shift of the short-run aggregate supply curve.

In the short run, a decline in aggregate demand would be associated with:

Suppose that an increase in aggregate demand causes an unplanned depletion in business inventories.Which of the following situations will result from this?

A fiscal policy that changes over time as economic conditions change is considered to be time inconsistent.

When the reservation wage is adjusted to account for a higher inflation rate:

The long-run Phillips curve is a horizontal line at the natural rate of unemployment.

When aggregate demand is lower than expected, inventories decline and the rate of unemployment falls.

Suppose the inflation rate has been 6 percent over the past four years.If the Federal Reserve announces an increase in the growth of the money supply, adaptive expectations would predict an inflation rate of 6 percent.