Exam 14: The Great Recession and the Short-Run Model

Refer to the following figure when answering the following questions. Figure 14.2: IS-MP Curve -Consider Figure 14.2. Starting from the long-run equilibrium, the burst of the housing bubble can be shown as a movement from point ________ to point ________.

The effects of deflation mimic the analysis of:

In the aftermath of the financial crisis that began in 2008, the Fed's assets grew primarily as:

Which of the following represents the AD curve with a financial friction?

Between approximately 2001 and 2006, the Taylor rule predicted the federal funds rate was:

The Monetary History of the United States, 1867-1960 was written by:

A constraint to complicated macroeconomic models has been:

Consider Figure 14.9 below, which shows bank excess reserves and the M1 multiplier. What information does this data show about the aftermath of the financial crisis?Figure 14.9: Excess Reserves and M1 Multiplier: 2006-2015

________ reduced loans despite the Fed's attempts to get liquidity flowing in financial markets after 2008.

In dollars, the magnitude of the Fed's balance sheet actions was larger than the funding from the Federal government's Trouble Asset Relief Program aid.

By 2016 (and in the aftermath of the financial crisis), the output gap is:

Refer to the following figure when answering the following questions. Figure 14.3: AS/AD Model -Consider Figure 14.3. If the economy begins in its long-run equilibrium and there is a decrease in the economy's financial friction, the economy would move from point ________ to point ________.

The difference between the three-month bond yield and the six-month bond yield represents a financial friction.

Briefly discuss the Fed's balance sheet before and after the financial crisis of 2008.

Figure 14.6: 90-Day Interbank Interest Rates for the Euro Area and the U.S. (Source: FRED II) -Figure 14.6 shows the 90-day interbank interest rates for the euro area and the United States, 2005-2014, which are proxies for short-term sovereign debt. What does this graph say about risk in the euro area and the United States?

Refer to the following figure when answering the following questions. Figure 14.3: AS/AD Model -Consider Figure 14.3. For most of 2008 the:

In a paper by Minneapolis Fed bank president Narayana Kocherlakota, he argues that research in macroeconomics is hampered by:

The March 20, 2013, Federal Open Market Committee statement asserts: "To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time . . . at least as long as the unemployment rate remains above 6-1/2 percent . . . and longer-term inflation expectations continue to be well anchored." (http://www.federalreserve.gov/newsevents/press/monetary/20130320a.htm) Your parents have taken interest in your fascinating Macroeconomics course and ask you to interpret this quote. Which of the following do you tell them?

According to the secular stagnation explanation, the two "culprits" for why Western economies have not had strong recoveries in the aftermath of the financial crisis are:

Your uncle is pleased to hear you are taking macroeconomics; this whole financial crisis puzzled him. He was not happy about "bailing" out the banks, and he asks you some questions. He is pretty good with graphs, so do not be afraid to use them to explain the following: (a) How does the rapid decline of the housing market and the subprime implosion affect the macroeconomy? (b) And why, pray tell, would we bail out the banks? Aren't there potential long-run problems with doing this?