If the Federal Reserve uses expansionary monetary policy there is a _____ short-run
effect on _____, but_____.
A) negative short-run; real GDP; prices remain unchanged in the long run.
B) positive short-run; real GDP; GDP remains equal to potential GDP in the long run.
C) t positive long-run; real GDP; GDP remains unchanged at its potential level in the
short run.
D) positive short-run; the price level; the aggregate price level remains unchanged in
the long run.
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B) positive short-run; real GDP; GDP remains equal to potential GDP in the
long run.
Public debt is:
A) taxes minus government purchases minus government transfers.
B) government debt held by foreigners.
,C) government debt held by individuals and institutions outside the government.
D) the government deficit divided by GDP.
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C) government debt held by individuals and institutions outside the
government.
There is a zero bound to:
A) the real money supply.
B) nominal interest rates.
C) potential output.
D) real money demand.
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B) nominal interest rates.
A $100 million increase in government spending increases equilibrium GDP by:
A) $100 million.
B) more than $100 million.
C) less than $100 million.
D) zero.
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B) more than $100 million.
,The main objective of contractionary monetary policy is to:
A) decrease aggregate demand.
B) close a recessionary gap.
C) increase investment.
D) raise the level of potential output.
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A) decrease aggregate demand.
A bank run can break a bank because:
A) borrowers default on their loans, and the bank's assets become worthless.
B) banks cannot quickly convert illiquid loans to liquid assets without facing a large
financial loss.
C) depositors' panic spreads to borrowers, who want to take additional loans from the
bank.
D) the bank's reserves kept with the Federal Reserve are in the form of illiquid U.S.
Treasury bonds.
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B) banks cannot quickly convert illiquid loans to liquid assets without facing
a large financial loss.
The long-run Phillips curve is:
A) the same as the short-run Phillips curve.
B) negatively sloped, showing an inverse relationship between unemployment and
inflation.
C) vertical at the nonaccelerating inflation rate of unemployment (NAIRU).
D) unrelated to the NAIRU.
, Give this one a try later!
C) vertical at the nonaccelerating inflation rate of unemployment (NAIRU).
Automatic stabilizers are government spending and taxation rules that cause fiscal
policy to be automatically contractionary when the economy contracts and
automatically expansionary when the economy expands.
A) True
B) False
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B) False
Which of the following is an expansionary fiscal policy?
A) an increase in the money supply that decreases interest rates
B) an increase in taxes that reduces the budget deficit and decreases consumption
C) a decrease in government spending
D) an increase in unemployment benefits
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D) an increase in unemployment benefits
Stabilization policies have:
A) not reduced the effects of business cycles caused by either demand shocks or
supply shocks.
B) reduced the economic fluctuations caused by demand shocks but have not been
effective against supply shocks.
effect on _____, but_____.
A) negative short-run; real GDP; prices remain unchanged in the long run.
B) positive short-run; real GDP; GDP remains equal to potential GDP in the long run.
C) t positive long-run; real GDP; GDP remains unchanged at its potential level in the
short run.
D) positive short-run; the price level; the aggregate price level remains unchanged in
the long run.
Give this one a try later!
B) positive short-run; real GDP; GDP remains equal to potential GDP in the
long run.
Public debt is:
A) taxes minus government purchases minus government transfers.
B) government debt held by foreigners.
,C) government debt held by individuals and institutions outside the government.
D) the government deficit divided by GDP.
Give this one a try later!
C) government debt held by individuals and institutions outside the
government.
There is a zero bound to:
A) the real money supply.
B) nominal interest rates.
C) potential output.
D) real money demand.
Give this one a try later!
B) nominal interest rates.
A $100 million increase in government spending increases equilibrium GDP by:
A) $100 million.
B) more than $100 million.
C) less than $100 million.
D) zero.
Give this one a try later!
B) more than $100 million.
,The main objective of contractionary monetary policy is to:
A) decrease aggregate demand.
B) close a recessionary gap.
C) increase investment.
D) raise the level of potential output.
Give this one a try later!
A) decrease aggregate demand.
A bank run can break a bank because:
A) borrowers default on their loans, and the bank's assets become worthless.
B) banks cannot quickly convert illiquid loans to liquid assets without facing a large
financial loss.
C) depositors' panic spreads to borrowers, who want to take additional loans from the
bank.
D) the bank's reserves kept with the Federal Reserve are in the form of illiquid U.S.
Treasury bonds.
Give this one a try later!
B) banks cannot quickly convert illiquid loans to liquid assets without facing
a large financial loss.
The long-run Phillips curve is:
A) the same as the short-run Phillips curve.
B) negatively sloped, showing an inverse relationship between unemployment and
inflation.
C) vertical at the nonaccelerating inflation rate of unemployment (NAIRU).
D) unrelated to the NAIRU.
, Give this one a try later!
C) vertical at the nonaccelerating inflation rate of unemployment (NAIRU).
Automatic stabilizers are government spending and taxation rules that cause fiscal
policy to be automatically contractionary when the economy contracts and
automatically expansionary when the economy expands.
A) True
B) False
Give this one a try later!
B) False
Which of the following is an expansionary fiscal policy?
A) an increase in the money supply that decreases interest rates
B) an increase in taxes that reduces the budget deficit and decreases consumption
C) a decrease in government spending
D) an increase in unemployment benefits
Give this one a try later!
D) an increase in unemployment benefits
Stabilization policies have:
A) not reduced the effects of business cycles caused by either demand shocks or
supply shocks.
B) reduced the economic fluctuations caused by demand shocks but have not been
effective against supply shocks.
