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

If the government fiscal deficit equals $240 million and government borrowing equals $120 million, what is the change in the money supply in the economy?

If nominal wage rates are contractually determined and cannot change in the short run, then an unexpected increase in the inflation rate will:

According to the theory of adaptive expectations, if the inflation rate has been 4.2 percent for the last ten years, people will expect next year's inflation rate to be:

Other things equal, the higher the fiscal deficit, the higher the required increase in base money.

Which of the following is most likely to increase the natural rate of unemployment?

When aggregate demand declines unexpectedly and wage contracts are fixed, then the average price level will:

The only difference between adaptive and rational expectations is that adaptive expectation assumes economic agents to be irrational.

In the 1980s, U.S.economists acknowledged that, it was not possible to exploit the tradeoff suggested by the Philips curve of the 1960s.This realization led to more stable macroeconomic policy, which in turn contributed to:

The Phillips curve describes a negative relationship between unemployment and inflation.

Monetary reform is a new monetary policy that includes:

The natural rate of unemployment is defined as the unemployment rate that exists in the absence of:

If the government fiscal deficit equals $78 billion, government borrowing equals $38 million, and tax revenue equals $92 billion, what is the value of the change in the money supply?

According to the theory of rational expectations, expansionary fiscal policy that is anticipated will:

Which of the following is most likely to have contributed to better inventory management?

Worldwide statistics prove that, when economies experience recessions, unemployment rates rise and wages fall.

In the long run, the economy is better off if policymakers exploit the short-run tradeoff between inflation and the unemployment rate.

If an increase in inflation is expected, which of the following events is the least likely to occur?

The introduction of a new currency is generally sufficient to achieve a permanent reduction in the inflation rate.

The adaptive expectations theory suggests that:

Since the growth in the money supply is unrelated to government spending, fiscal policy and monetary policy can be conducted independently.