Exam 15: A Dynamic Model of Economic Fluctuations

According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with ____ increase in the nominal interest rate.

(Multiple Choice)

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Question 41

In the dynamic model, the demand for goods and services will as the natural rate of output increases and _ as the real interest rate increases.

(Multiple Choice)

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Question 42

When the central bank lowers its target inflation rate, it _ the nominal and real interest rate, which shifts the dynamic aggregate demand curve to the _.

(Multiple Choice)

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Question 43

Fill in the blanks: As a dynamic response to demand shock in the short run, the DAD curve shifts (say in period t) _____, causing inflation to_ and output to _, while in next period (t+1) causing the aggregate supply curve to ____ .

(Essay)

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Question 44

In the dynamic model of aggregate demand and aggregate supply, holding other factors constant, when the natural level of output increases, then inflation:

(Multiple Choice)

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Question 45

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, in the period in which a positive supply shock occurs, the DAS curve _ and the DAD curve _.

(Multiple Choice)

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Question 46

According to the Taylor rule, when real GDP is above its natural level, the nominal federal funds rate should be _, and when inflation is below 2 percent, the nominal federal funds rate should be _.

(Multiple Choice)

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Question 47

Long-run growth ____ the demand for goods and services.

(Multiple Choice)

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Question 48

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period the DAS curve _ and the DAD curve _.

(Multiple Choice)

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Question 49

Use the model of dynamic aggregate demand and aggregate supply to graphically illustrate the impact on output and inflation of an exceptional weather pattern that results in a one-period glut of food worldwide that reduces food prices (a one-period negative supply shock) when the economy is initially at long-run equilibrium. Explain the time path of output and inflation in words.

(Essay)

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Question 50

The Taylor rule can be written as FF rate = $\pi$ + 2.0 + 0.5 ( $\pi$ - 2.0) + 0.5(GDP gap), where FF rate is the nominal federal funds rate, $\pi$ is the inflation rate, and the GDP gap is the percentage deviation of real GDP from its natural level. If inflation is 4 percent and the GDP gap is 2 percent, then according to the Taylor rule, the Fed should set the nominal federal funds rate at _____ percent.

(Multiple Choice)

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Question 51

Long-run equilibrium occurs in the dynamic model of aggregate demand and aggregate supply when:

(Multiple Choice)

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Question 52

Of the five endogenous variables in the dynamic model of aggregate demand and aggregate supply, which are the real variables that do not depend on the monetary policy in long-run equilibrium?

(Multiple Choice)

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Question 53

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _ in output and __ in inflation.

(Multiple Choice)

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Question 54

Predetermined variables in a model are treated as if they are essentially:

(Multiple Choice)

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Question 55

The dynamic aggregate demand curve will shift if any of the following changes except the:

(Multiple Choice)

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Question 56

Which of the following would be represented by a negative value of the random supply shock, $\nu$ _t?

(Multiple Choice)

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Question 57

According to the Phillips curve, firms raise prices when output is _ the natural level of output or, equivalently, when the unemployment rate is _ the natural rate of unemployment.

(Multiple Choice)

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Question 58

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period of the change output _ and inflation _.

(Multiple Choice)

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Question 59

In the dynamic model of aggregate demand and aggregate supply, changes in the natural level of output change:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 110

According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with ____ increase in the nominal interest rate.

In the dynamic model, the demand for goods and services will as the natural rate of output increases and _ as the real interest rate increases.

When the central bank lowers its target inflation rate, it _ the nominal and real interest rate, which shifts the dynamic aggregate demand curve to the _.

Fill in the blanks: As a dynamic response to demand shock in the short run, the DAD curve shifts (say in period t) _____, causing inflation to_ and output to _, while in next period (t+1) causing the aggregate supply curve to ____ .

In the dynamic model of aggregate demand and aggregate supply, holding other factors constant, when the natural level of output increases, then inflation:

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, in the period in which a positive supply shock occurs, the DAS curve _ and the DAD curve _.

According to the Taylor rule, when real GDP is above its natural level, the nominal federal funds rate should be _, and when inflation is below 2 percent, the nominal federal funds rate should be _.

Long-run growth ____ the demand for goods and services.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period the DAS curve _ and the DAD curve _.

Long-run equilibrium occurs in the dynamic model of aggregate demand and aggregate supply when:

Of the five endogenous variables in the dynamic model of aggregate demand and aggregate supply, which are the real variables that do not depend on the monetary policy in long-run equilibrium?

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _ in output and __ in inflation.

Predetermined variables in a model are treated as if they are essentially:

The dynamic aggregate demand curve will shift if any of the following changes except the:

Which of the following would be represented by a negative value of the random supply shock, $\nu$ _t?

According to the Phillips curve, firms raise prices when output is _ the natural level of output or, equivalently, when the unemployment rate is _ the natural rate of unemployment.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period of the change output _ and inflation _.

In the dynamic model of aggregate demand and aggregate supply, changes in the natural level of output change:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

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Exam 15: A Dynamic Model of Economic Fluctuations

According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with ____ increase in the nominal interest rate.

In the dynamic model, the demand for goods and services will ____ as the natural rate of output increases and _____ as the real interest rate increases.

When the central bank lowers its target inflation rate, it _____ the nominal and real interest rate, which shifts the dynamic aggregate demand curve to the _____.

Fill in the blanks: As a dynamic response to demand shock in the short run, the DAD curve shifts (say in period t) ___________, causing inflation to___________ and output to ___________, while in next period (t+1) causing the aggregate supply curve to __________ .

In the dynamic model of aggregate demand and aggregate supply, holding other factors constant, when the natural level of output increases, then inflation:

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, in the period in which a positive supply shock occurs, the DAS curve _____ and the DAD curve _____.

According to the Taylor rule, when real GDP is above its natural level, the nominal federal funds rate should be _____, and when inflation is below 2 percent, the nominal federal funds rate should be _____.

Long-run growth ____ the demand for goods and services.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period the DAS curve _____ and the DAD curve _____.

Long-run equilibrium occurs in the dynamic model of aggregate demand and aggregate supply when:

Of the five endogenous variables in the dynamic model of aggregate demand and aggregate supply, which are the real variables that do not depend on the monetary policy in long-run equilibrium?

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _____ in output and ______ in inflation.

Predetermined variables in a model are treated as if they are essentially:

The dynamic aggregate demand curve will shift if any of the following changes except the:

Which of the following would be represented by a negative value of the random supply shock, ν\nuν t?

According to the Phillips curve, firms raise prices when output is _____ the natural level of output or, equivalently, when the unemployment rate is _____ the natural rate of unemployment.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period of the change output _____ and inflation _____.

In the dynamic model of aggregate demand and aggregate supply, changes in the natural level of output change:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

Filters

In the dynamic model, the demand for goods and services will as the natural rate of output increases and _ as the real interest rate increases.

When the central bank lowers its target inflation rate, it _ the nominal and real interest rate, which shifts the dynamic aggregate demand curve to the _.

Fill in the blanks: As a dynamic response to demand shock in the short run, the DAD curve shifts (say in period t) _____, causing inflation to_ and output to _, while in next period (t+1) causing the aggregate supply curve to ____ .

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, in the period in which a positive supply shock occurs, the DAS curve _ and the DAD curve _.

According to the Taylor rule, when real GDP is above its natural level, the nominal federal funds rate should be _, and when inflation is below 2 percent, the nominal federal funds rate should be _.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period the DAS curve _ and the DAD curve _.

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _ in output and __ in inflation.

Which of the following would be represented by a negative value of the random supply shock, $\nu$ _t?

According to the Phillips curve, firms raise prices when output is _ the natural level of output or, equivalently, when the unemployment rate is _ the natural rate of unemployment.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period of the change output _ and inflation _.