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, ________.

Frictional unemployment is to ________ as structural unemployment is to ________.

A negative shock in aggregate demand will likely result in ________.

Which statement is a good argument in support of policy activism?

Suppose that wages and prices are quite flexible, so that the short-run aggregate supply curve is steep. In that case, ________.

According to the Taylor rule, which of the following will lead to the largest increase in the nominal federal funds rate?

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

"With autonomous changes in the policy interest rate, the Federal Reserve cannot determine the long run equilibrium level of the real interest rate or potential output and will only be able to determine inflation." This statement is consistent with ________

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

Which of the following statements is correct?

A central bank with a hierarchical mandate will seek ________ as a condition of pursuing other goals.

Suppose that inflation is at the target rate and output has fallen substantially below potential output. A central bank with a primary objective of price stability should ________.

When a permanent negative supply shock hits the economy ________.

Shocks to the macroeconomy will cause a change in the equilibrium real interest rate, except ________.

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

Aggregate Demand and Supply Analysis -In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. If a fiscal stimulus package is implemented quickly, raising output to $12 trillion, while inflation remains constant at one percent, then the figure implies that the real interest rate will be ________ percent.

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

The American Recovery and Reinvestment Act of 2009 ________.

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 ________.

According to the Taylor rule, which of the following will lead to a higher nominal federal funds rate?