Exam 14: Financial Crises, Stabilization, and Deficits

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. Suppose it takes policy makers from time t₄ to time t₇ to take an action to stimulate the economy. This is an example of

If the interest rate falls, you would expect the price of any stock to

Policy lags mean that

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. If policy makers decide at time t₂ that the economy is contracting too fast, but the policy changes start affecting the economy at t₄, then the policy will be

One would expect the price of a share of stock to fall if

If you own a share of stock in a company and the risk associated with its business rises you would expect

If the expected future earnings of a company goes down, you would expect the price of its stock to

Falling stock prices decrease investment because

In general, monetary policy has a longer ________ lag than fiscal policy but shorter ________ lag.

If the interest rate rises, you would expect the price of any stock to

The implementation lag for monetary policy requires

The ________ lag of stabilization policy represents the time that is necessary to put the desired policy into effect once economists and policy makers recognize the need.

If a share of stock is correctly valued today, a bubble in the stock market is when you purchase a stock because

Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2 -Refer to Figure 14.2. If economic policy causes output to decrease to Y₀ and the price level to decrease to P_0, the aggregate demand curve shifts from

A stock bubble is against insider trading laws and if you participate in one you can be arrested.

When a firm issues new shares of stock

In general, fiscal policy has a ________ implementation lag than monetary policy and a ________ response lag.

A stock is

During periods of slow growth, the Federal Reserve will likely

The adverse impact of a negative aggregate demand shock is reduced when the government does not target the deficit because