If workers and firms have rational expectations, they form their expectations using
A) only information provided to them by the government.
B) only information from the past.
C) only information gathered from random sources.
D) all the information available to them.
Ques. 2If expectations are adaptive, how will the economy adjust to a new long-run equilibrium in response to contractionary monetary policy? Support your answer with a graph of the Phillips curve.
What will be an ideal response?
Ques. 3Which of the following is an appropriate policy for the Fed to pursue if it wants to increase the money supply?
A) lower taxes B) raise the reserve requirement
C) buy U.S. Treasury bills D) raise the discount rate
Ques. 4If the dollar appreciates, how will aggregate demand in the United States be affected?
A) Aggregate demand will shift to the right as exports increase.
B) Aggregate demand will shift to the right as imports increase.
C) Aggregate demand will shift to the left as exports increase.
D) Aggregate demand will shift to the left as imports increase.
Ques. 5According to the real business cycle model, ________ in aggregate demand ________ GDP.
A) increases; do not affect B) increases; increase
C) increases; decrease D) decreases; increase
Ques. 6An argument in favor of the Federal Reserve adopting inflation targeting is that in the long run, the Fed can have an impact on inflation but not on real GDP.
Indicate whether the statement is true or false
Ques. 7Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?
What will be an ideal response?
Ques. 8Refer to Figure 27-10. In the graph above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C?
A) buy Treasury bills B) increase income taxes
C) increase government spending D) decrease the discount rate
Ques. 9When Americans increase their demand for Japanese goods
A) the demand for dollars will rise, and the demand for yen will rise.
B) the supply of dollars will rise, and the demand for yen will rise.
C) the demand for dollars will fall, and the demand for yen will rise.
D) the supply of dollars will fall, and the demand for yen will fall.
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