Exam 13: Macroeconomic Policy and Aggregate Demand and Supply Analysis

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

Figure 13.1 -If the economy is at point 1 in Figure 13.1 and there is no policy intervention,what happens next?

If the inflation rate target is 2%,the current inflation rate is 1%,and the output gap is minus 2%,then according to the Taylor rule,the nominal federal funds rate should be ________ percent.

How might strict adherence to the Taylor rule discourage demand-pull inflation? How might demand-pull inflation occur,nonetheless?

-In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.If there is no policy intervention,we should expect ________.

When a temporary negative supply shock hits the economy,then in the short-run ________.

Which of the following is a likely objective of monetary policy?

-In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.Suppose that a combination of fiscal stimulus and recovery of consumer and business confidence shifts the IS and AD curves,as shown in the figure.The equilibrium real interest rate is ________ percent.

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

What is the divine coincidence? When and why does it not hold true?

The time it takes for policymakers to obtain and to understand the data and to change the policy instrument based on that information is known as ________,respectively.

In recent decades,the trend among central banks has been to adopt ________.

Many borrowers defaulted on subprime mortgages ultimately disrupting financial markets by August 2007.Which of the following is a likely result of this increase in financial frictions?

How might openness to the global economy influence the debate between policy activists and nonactivists?

Ceteris Paribus,if current output has fallen below potential ________.

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

Suppose that data for a particular economy over time suggest that its aggregate demand curve is both steep and shifts frequently.We might reasonably infer that ________.

Figure 13.1 -The aggregate demand curves in Figure 13.1 have a positively-sloped portion.The reason this can happen is ________.

Is the Taylor rule of greater use to activist or to nonactivist policy makers?

-In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.If autonomous monetary policy (alone)is used to bring output to $12 trillion,then the figure implies that the real interest rate will be ________ percent,and the inflation rate will be one percent.